Mortgage rates moved lower again today, solidifying yesterday's tentative break back into the "high 3's" for top tier 30yr fixed rates. In fact, in terms of end-of-day rate sheet data, today's rates are actually the lowest in more than a year and a half. The only instance of lower rates came during the morning of October 15th, before the afternoon saw rapid deterioration.
All that having been said, lender pricing is highly stratified during this move because of the holiday. Not all lenders have improved pricing as much as the average lender, and the average lender hasn't improved pricing nearly as much as they would during a normal week. That generally more cautious strategy is an unfortunate reality during holiday weeks, but it does mean that if financial markets are in similar shape come Monday, that rate sheets should improve a bit more.
Whether or not markets are able to hold steady (or better) is another matter. Monday could look completely different for markets, for better or worse. Combine that with the fact that many lenders are in the best shape of the year and there's a good case to be made for locking in these gains. That, of course, assumes you have the ability to do so with a lender that's actually passing them along. Otherwise, the risk/reward outlook for floating is more balanced.
Loan Originator Perspective
"I would typically look to lock to preserve these gains heading into the long holiday weekend, but based on what we have seen over the last few trading sessions my perception is we are moving lower and are still owed from the past few days. Loans scheduled to close in a 10-15 day window should be locked, however Monday may bring on better pricing, barring an extraordinary circumstance over the weekend. Happy Thanksgiving." -Constantine Floropoulos, Quontic Bank
"The market is improving, yet I'm not seeing it on rate sheets. It's very common to see lenders fail to pass along gains in front of a long holiday weekend, which we are heading into now. I'd suggest to float until next week, when we're more likely to see these gains. Have a great long weekend." Brent Borcherding, brentborcherding.com
"Despite the upcoming Holiday shortened week, lenders have passed along some of the gains but they could have been more generous. If closing within 15 days, might be wise to go ahead and lock, but all other closings i think should float until Monday." -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.875-4.0
- FHA/VA - 3.5
- 15 YEAR FIXED - 3.125-3.25
- 5 YEAR ARMS - 3.0 - 3.50% depending on the lender
Ongoing Lock/Float Considerations
- The hallmark of 2014 has been a narrow range in rates. Too many market participants bet on rates going higher in 2014, and markets punished that imbalance with a paradoxical move lower.
- European markets helped that process along and continue to play a prominent role in keeping US rates lower than they otherwise might be.
- For most of the Summer and early Fall months, rates held a narrow range of 4.125% -4.25% (essentially where the 2014 rate recovery has bottomed out) and finally broke to a 3.875%-4.0% range in mid-October. After correcting back to 4.125% briefly, November saw a calm, supportive trend that helped establish a ceiling. From there, rates trickled back down into the high 3's by the end of the month.
- 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, 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).
In what could be a controversial move the Federal Housing Finance Agency (FHFA) has directed the government sponsored enterprises (GSEs) to allow foreclosed homeowners to repurchase their former homes at fair market value. Prior to Tuesday's directive foreclosed homeowners were required to pay Freddie Mac or Fannie Mae the entire amount that had been owed on their mortgage prior to foreclosure. This requirement applied as well to any third party who sought the buy the home for the benefit of the previous borrower/owner. This requirement had meant that the GSEs had to treat such prospective purchasers differently than others who wished to purchase the property and were allowed to do so at the fair market price as determined by the GSEs.
Sales of newly constructed single family homes rose slightly in October compared to September and were also improved from sales a year earlier. The U.S. Census Bureau and the Department of Housing and Urban Development said today that sales in October were at a seasonally adjusted annual rate of 458,000 units, up 0.7 percent from September sales. September new home sales were originally reported at 467,000 units were adjusted down in this report to 455,000. October sales were 1.8 percent above the October 2013 estimate of 450,000 units.
While pending home sales were down slightly compared to September the National Association of Realtors® (NAR) said October was the second month in a row that its Pending Home Sales Index (PHSI) bested the previous year's numbers and called the month's activities "healthy."
The PHSI was 104.1 in October, down 1.1 percent from the upwardly revised September level of 105.3. The October number is 2.2 percent higher than the 101.9 posted in October 2013 and has remained above 100, considered an average level of contract activity, for six consecutive months....(read more)
Mortgage application volume was mixed during the week ended November 21. The Mortgage Bankers Association (MBA) reported that its Market Composite Index, a measure of the volume of applications for residential mortgages was down 4.3 percent from the previous week on a seasonally adjusted basis but rose 5.0 percent on an unadjusted basis. This discrepancy is probably accounted for by an adjustment made in date the previous week to account for the Veterans Day holiday.
The Refinance Index was also down 4.0 percent compared to the week ended November 14 but the share of applications made during the week for refinancing rose from 61 percent to 63 percent.
Mortgage rates fell more today than in recent days. Positivity was fueled chiefly by European bond market strength as serious growth concerns persist and rates push ever-closer to their mid-October lows. Domestically, a strong 5yr Treasury auction helped ignite an afternoon bond market rally that included mortgage-backed securities (MBS). When MBS improve enough in the middle of the day, lenders often release new, stronger rate sheets.
This was the case today, and the improvements were good enough to bring 3.875% into the running for the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios. As of this afternoon, it's just barely edging out 4.0%. That's the first time we've seen the most common top-tier rate quote in the 3's since October 21, and one of only a handful of times since May 2013. The takeaway is that rates are very strong here, and while further improvements are just as possible as not, they're also more worth protecting if you have the ability to lock. That's the suggestion made by past precedent anyway....(read more)
The maximum conforming loan limit will remain at $417,000 for most of the U.S. in 2015. FHFA announced the limits, which define the size of loans eligible to be acquired by Fannie Mae or Freddie Mac, on Monday. The limits are established under the terms of the Housing and Economic Recovery Act of 2008 (HERA) and recalculated each year.
The limits were unchanged despite substantial increases in most indexes that measure home prices on national and local levels. FHFA explained that HERA requires that while the baseline loan limit be adjusted each year to reflect changes in the national average home price, after a period of declining prices any prior declines must be fully offset before a loan limit increase can occur....(read more)
Is the party officially over?
S&P Dow Jones Indices said today that the increase in home prices, which has shown diminishing energy for months, experienced a broad-based slowdown in September. The company's Case-Shiller Home Price Indices continued to show gains over the levels of a year earlier, but the size of those gains continued to contract.
The Case-Shiller National Index rose 4.8 percent from September 2013 to September 2014 while the 10-City Composite posted a 4.8 percent increase compared to September 2013 and the 20-City was up 4.9 percent. The respective year-over-year gains for the two Composites in August were 5.5 and 5.6 percent. Charlotte and Dallas were the only cities to see stronger annual gains in September than in August while Cleveland was unchanged....(read more)
Mortgage rates continue making improvements so small and so steady that they're barely noticeable, but they're improvements just the same. That's recently left us in the best territory in nearly a month. Today extends those slow and steady gains just enough to technically claim the "1-month low" designation, despite the fact that rates aren't materially different than they have been. The most prevalently-quoted conforming 30yr fixed rate remains 4.0% for top tier borrowers, but each day of modest improvement brings us closer to 3.875% and puts 4.125% farther in the rearview.
With the Thanksgiving holiday coming up, financial markets will be cramming a day and a half worth of work mostly into Wednesday....(read more)
The Federal Reserve has completed its latest round of Quantitative Easing, the government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae are under orders to continue shrinking their investment portfolios and significant constraints exist to keep private investors from purchasing agency mortgage-backed securities (MBS). So who, the Mortgage Bankers Association (MBA) asks, is going to pick up the slack?
A white paper written by MBA's vice president and senior economist Michael Fratantoni, lays out the conundrum facing the MBS market. Fratantoni says both policy makers and the housing industry have a common interest in bringing private capital into the mortgage markets but the key question is how and in what form that private capital can best reenter the system. MBA has advocated for private capital to have a larger role in covering credit risk within the government guaranteed, conforming portion of the market but we need to consider how to draw it to the interest-rate risk of the conforming market and how to reengage it for lending outside of the government guaranteed system....(read more)