Mortgage rates didn't move any lower today, but they earned an important distinction nonetheless.  As of today, you'd have to go back 3 full years to see rate sheets any lower, on average.  May 10th, 2013 was a very bumpy day for rates, and it capped a week that served as the starting point for the 'taper tantrum' (several months of rapidly increasing rates as markets adjusted to the idea that the Fed would be ending its bond buying program).  With a range of 3.5 to 3.625%, today's top tier conventional 30yr fixed quotes are right in line with those seen on May 9th.  

There was no meaningful inspiration for bond markets today, but it is somewhat reassuring that they've continued to hold ground even as stocks have moved much higher in recent days.  While it's never a 1:1 relationship, higher stock prices often accompany a move toward higher rates as investors sell bonds (bond prices and rates have an inverse relationship).  

Given that rates are at 3-year lows and that we've had a tough time breaking any lower from here, there's certainly no reason to second guess locking.  Conversely, given that we've managed to stay low in spite of some headwinds, risk-takers are justified in floating, but should always set a limit as to how much higher rates could go before they lock at a loss.


Loan Originator Perspective

"I am optimistic that rates could test new lows in the near future, but I still went ahead and lock loans that are closing in May.   I think short term, you should take the recent gains, lock in and move on.  Longer term closings, those in June or after, I think floating is the way to go.  " -Victor Burek, Churchill Mortgage

"Rates hovered near unchanged today, despite large corporate bond offerings and a treasury auction.  While "not losing" is a positive, both treasury and MBS prices are well above their 25, 50, and 100 moving day averages.  This typically results in a selloff at some point, the only question is when.  My May pipeline, and most of June's is locked, borrowers sleeping well at night.  Floating may return some additional gains, but borrowers need to realize rates move both ways!" -Ted Rood, Senior Originator

Today's Best-Execution Rates

  • 30YR FIXED - 3.5 - 3.625%
  • FHA/VA - 3.25%-3.5%
  • 15 YEAR FIXED - 3.00%
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • The Fed finally hiked on December 16th, causing fears of rising rates in 2016, but markets began the new year with rates moving surprisingly lower.  Major losses in stocks and oil prices were part of the same trend of investors moving away from risk.
  • After bottoming out fairly close to all-time lows in February, rates have seen only brief episodes of volatility in a low, narrow range.  

  • The Fed's most recent announcement at the end of April reinforced their cautious approach to rate hikes.  The last time that happened, stocks cheered, but this time they've been moving lower.  Bond markets like that, and they'll continue to like it until stocks prove they can break back above 2015 highs.
     
  • Even though the broader backdrop has taken a positive turn for rates, there are still tactical opportunities to lock.  In general, we look for any prolonged moves lower (i.e. 10 days in a row without moving higher) or any major low-rate milestones (i.e. 3-year lows).
     
  • As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, conventional 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.'  Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy.  It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).