Mortgage rates fell again today, and while the move wasn't big, it was enough to bring most lenders back in line with the best rates from two weeks ago.  Those have the added distinction of being the best rates since May 2013.  At these levels, 3.625% is widely available as a top tier conforming 30yr fixed quote and a few lenders are quoting 3.5%.  Even if your lender isn't, you can likely choose to pay higher upfront costs in exchange for the lower rate.  This is neither good nor bad, but simply a matter of personal preference.  You can divide the upfront cost increase by the monthly payment savings to determine how many months it would take to break even on the additional expense.  If the trade-off makes sense to you, it makes sense.  If not, stick with the higher rate. 

Today's big market event was the Fed Announcement.  Markets weren't expecting much of a change and they didn't get one.  But that didn't stop the reaction from getting surprisingly large in terms of trading levels (in both stocks and bonds).  The post-Fed move was positive for bond markets, and thus positive for rates.  That means that many lenders were NOT at their best recent levels this morning, and only got there after mid-day reprices following the Fed-induced rally.

Loan Originator Perspective

"The FOMC announcement today didn't really come as a shock, but it did indicate that inflationary pressures are further out on the time horizon. This is positive news for mortgage rates. Some lenders have already repriced for the better, but many as of 3pm eastern have not. My guidance remains the same as it has been for about a week now, float all loans overnight to allow lenders to pass along the improvements. As is usually the case, lenders are very slow to pass along the gains but very quick to take them away. If you must lock today, wait til as late as possible. " -Victor Burek, Open Mortgage

"After the Fed rate decision today mortgage pricing improved sharply. Difficult to guage the exact reason but my reading of decision is the markets perceive the Fed is willing to hold off on rate increases if growth continues to slow internationally and it creates any sort of knock on effects in the US. Markets may believe that is likely. This of course sets up a situation where expectations can be disappointed and the market reacts adversely, so borrowers must keep in close touch with their loan officer who is hopefully in tune with the markets. I would lock these gains short term and continue to float longer term." -Hugh W. Page,Mortgage Banker, Seacoast Bank

"Its Fed day and for the first time in quite a while the stock market sold off on policy language which appears to indicate the FED may not raise interest rates as soon as the market originally anticipated. Normally news like this would ignite a stock rally. Could it be the market is growing cautious after setting so many new highs? Maybe there is concern over possible future deflation? Either way bonds may benefit and lower rates may be on the horizon. Float all loans for the time being. " -Manny Gomes, Branch Manager Norcom Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 3.625
  
• FHA/VA - 3.25
  
• 15 YEAR FIXED -  3.0-3.125
  
• 5 YEAR ARMS -  3.0 - 3.50% depending on the lender

Ongoing Lock/Float Considerations

• 2015 began with a strong move to the lowest rates seen since May 2013.  The catalyst has been and continues to be Europe.
  
  
• European bond yields trended constantly lower in 2014, thus playing a prominent role in keeping US rates lower than they otherwise might be.  Many feel that Europe will continue to slide until their central bank engages in US-style quantitative easing.  Some see this happening in early 2015.  In any event, we're looking for a turn in Europe, first and foremost, before worrying about the longer-term trend in bond markets being at serious risk of reversing.
  

• It's impossible to know when Europe will turn a corner, and even then it's only the sort of thing we'll be able to observe in hindsight.  That means every head-fake toward higher rates runs the risk of developing into a longer term rise, even if those risks vary greatly in terms of probability.  Clients with longer term time horizons and who otherwise don't mind losing some ground in exchange for the chance at locking even lower rates are the only ones who should float.  Clients who must close by a certain date or who can't afford to lose any ground on rates should generally be locking even though the longer term trend has been in their favor for over a year now.
  
  
• 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).