Mortgage rates found their footing yesterday, moving sideways to slightly lower after losing ground the past couple of days. Earlier in the week, rates hit their lowest levels in 3 years. While today’s improvements don’t quite get us back there, they keep us very close. Perhaps even more importantly, underlying bond markets ended the week with an even stronger move toward lower rates.
Mortgage Rates End Week on Hopeful Note
Lenders set rates based primarily on trading levels in mortgage-backed-securities, a bond-like financial instrument that has a tendency to move in a similar direction as 10yr US Treasuries and by a similar amount. It’s actually not uncommon for lenders to stay away from aggressively adjusting rate sheets to reflect adjustments in trading levels on a Friday afternoon. As such, if markets are merely in somewhat similar territory at the beginning of next week, rate sheets really should be even better. In plain english, the market improvements came too late inside the week to have a big influence on mortgage rates, but that means we start out with an advantage next week, unless bond markets happen to be in very rough shape.
Loan Originator Perspective
“The benchmark 10 year note has broken a key floor of resistance. I was hopeful of a rally after the final auction on Thursday, looks like we got it today rather than late yesterday. I have never been a fan of locking on Friday’s, so like yesterday I continue to favor floating. Let’s see if this rally can continue.” -Victor Burek, Churchill Mortgage
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 near all-time lows in February, rates have seen only brief instances 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 have 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, you will still find tactical opportunities to lock. Generally speaking, we look for any prolonged moves lower (i.e. 10 days consecutively without moving higher) or any major low-rate milestones (i.e. 3-year lows).
As always, please remember that the rates discussed generally refer to what we’ve termed ‘best-execution’ (which is, one of the most frequently quoted, conforming, conventional 30yr fixed interest rate for top tier borrowers, based not only on the outright price, but in addition ‘bang-for-the-buck.’ Generally speaking, our best-execution rate tends to connote no origination or discount points–though this can vary–and has a tendency 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).
Nick & Cindy Davis work with several lenders here in the Tampa Bay area ready to assist you with your new home purchase. Feel free to call us at 813-300-7116 or just click here and let us get working on finding you your new home.