Mortgage rates continued pushing into the lowest levels in more than 6 months after a docile congressional testimony from Fed Chair Yellen this morning.  Financial markets and mortgage lenders were cautious ahead of the 10am speech, but improved afterward.  A majority of lenders issued mid-day reprices, bringing rate sheets to levels not seen since November 1st.  The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) is already straddling 4.25% and 4.125%.  Today's improvement equates to an effective drop of 0.04%.

Today's strength means that rates are now officially "testing" a break below the longer term range--a range that has remained intact since the beginning of February.  Of course we're already below that range today, but when it comes to looking for bigger-picture shifts in the trend, we're looking for a certain combination of TIME spent outside the trend and DISTANCE between the edge of the trend and current levels.

If we were only looking at mortgage rates, the combination of time spent under the 2014 range and the distance below the previous lows is looking pretty promising.  If we look elsewhere, however, to some of the other factors that can impact mortgage rate momentum, it still makes sense to be cautious.  One of the factors is the situation in Ukraine that's thought to be keeping some extra downward pressure on interest rates in the US. 

The other consideration is that the Treasury market, which is a very close companion for mortgage rates, hasn't quite shown the same desire to break its own range, and that's something we'd need to see in order to have more confidence in a more pronounced move lower.  That's not to say it can't happen, simply that where mortgage rates seem rather convinced, the broader market for interest rates isn't quite there yet.

Loan Originator Perspectives

"It appears rates are trying to make a move and break out of the current range that has existed all year. Much of the improvement is due to the geopolitical risk that Ukraine is creating which could unwind quickly and unexpectedly which makes floating risky. Tomorrow we get our last treasury auction for the week, and it isn't uncommon for rates to rally after the new supply has been absorbed by the markets. At this point, I think floating is the way to go." -Victor Burek, Open Mortgage

"LOCK---The 10 year auction today went well, but it wasn't a barn burner and we still set at the bottom of the range. There's no data scheduled tomorrow or Friday that is viewed with enough importance to help us break lower. The greatest risk is to the upside right now, protect your gains & lock. " -Brent Borcherding, www.brentborcherding.com

"Continued small improvements like today are quite nice but we still seem to have resistance to a convincing break through this range we've been stuck in. As we continue to bounce along the bottom of the range I would remain cautious. I still favor locking these rates in now and especially for closings within 30 days." -Hugh W. Page, Sen. Mortgage Consultant, M.B.A. Capital Partners Mortgage

"Rates dropped today for both US bonds and mortgages as we moved further into the best pricing of the year. While we haven't definitively broken our prior range, we're still trending downward. Comments from the Fed, Ukrainian Drama, and a decent treasury auction all helped, nice break for buyers and borrowers!" -Ted Rood, Senior Mortgage Planner, tedroodteam.com

"Best rates of the year and potential for further improvement. Locking always safe, but floating has paid off the last few weeks. If bonds can break below the floor in place all year and stay there for a few days, it would be a positive development. " -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.

Today's Best-Execution Rates

• 30YR FIXED -4.125 - 4.25%
  
• FHA/VA - 3.75-4.0%
  
• 15 YEAR FIXED -  3.25-3.375%
  
• 5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

• The Fed has stayed the course on their $10bln per meeting reduction in bond buying, though markets have handled it relatively calmly compared to the days of "coming to terms with tapering" in 2013. 
  
• Rates fell significantly in January, leveled-off in February and took choppy steps higher in March, they've since settled into a flat range mostly consisting of 4.375 and 4.5%, but with occasional forays to 4.25 and 4.625%
  
• The uncertain impact on the economy from the colder-than-normal winter weather as well as geopolitical risk surrounding Ukraine helped the range persist. 
  
• While the bias had been generally toward higher rates, it reversed course in April and rates returned to the lower end of the range by May 1st.  As the "weather effects" fall out of the spotlight, market participants are seeing a bit more organic weakness in the economy than they'd expected.  The focus is returning to economic data to determine where we go from here.
• As of the second week in May, rates were as low as they've been since November 1st, certainly suggesting a break of the 2014 rate range, but still lacking confirmation from related markets.
• (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario.  There are many reasons a quoted rate may differ from our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).