Mortgage rates continued lower at a moderate pace for a second straight day, raising hopes that markets might be pushing back against the existing September trend.  That trend has seen rates move higher at the fastest pace of the year, completely undoing the solid improvements in August.  All that having been said, the entirety of 2014 has operated on a micro scale in terms of volatility.  Unlike years past, a move of an eighth of a point in rate has been big news recently.

The most prevalently-quoted conforming 30yr fixed rate for top tier scenarios remains 4.25%--a level it reached earlier this month after holding 4.125% for more than 2 months.  When we note improvements in rates and no change in the most prevalently-quoted rate, it means that closing costs fell slightly.  When that happens enough, the next lowest rate becomes viable from a cost standpoint and begins to take over in terms of prevalence.

With that in mind, the past two days of improvement don't quite get us back to 4.125%, but a few more would.  As of today, we haven't seen a strong enough push back against the September trend to conclude a meaningful correction is underway.  That would change if tomorrow brings a similar dose of positivity.  Whether or not we get it remains to be seen.  Recent market movements leave it open as a possibility, but also suggest being ready to lock at the first sign of trouble.

Loan Originator Perspective

"Floating through the weekend definitely saved you some money as rates improved. However, we need to see more improvement to feel convinced significantly lower rates are ahead. This week is data packed and cautiously floating has a chance to be greatly rewarded. As always, be ready to lock but my advice is to float into tomorrow and reassess at that time." -Brent Borcherding, www.brentborcherding.com

"Looks like we are going to have our third straight day of positive price action in the rates markets. Anytime you have a few days in a row of better pricing, you should consider locking, especially if you only have a week or two until closing. However, we are quickly approaching month end, quarter end, which is typically a supportive time for mortgage rates. I would think floating anything over a couple weeks from closing would be worth the risk. There is still a lot of geopolitical risk floating around, and things are deteriorating in Europe rather quickly which both are supportive of a flight to safety where bonds rally and stocks sell off." -Victor Burek, Open Mortgage

"If you have been floating following the FOMC meeting you have been rewarded. Patience may yet further reward you for from a technical picture rates may have further more to decline. A drop on the ten year below 2.55 and we may head back down to the lower end of the rate range." -Manny Gomes, Branch Manager, Norcom Mortgage

"it was nice to see the 10 year bond yield creep back down to 2.55% today as MBS also improved. Let's hope the trend away from last week's Fed induced higher rates continues. For the moment, can't fault those who choose to float, assuming they've got time before closing and an LO with a keen awareness of MBS' daily movement!" -Ted Rood, Senior Mortgage Planner, tedroodteam.com

"Small rally today in pricing is somewhat encouraging but we need some movement that is much more convincing in order for me to move strongly into a "floating" bias. As I've said for sometime now, I favor locking short term closings (15 days or less) and strongly considering it for longer term closings. But in either case you should go by your risk tolerance and stay in close touch with your loan officer." -Hugh W. Page, Mortgage Banker, Seacoast National Bank

Today's Best-Execution Rates

• 30YR FIXED - 4.25
  
• FHA/VA - 3.75-4.0%
  
• 15 YEAR FIXED -  3.375-3.5
  
• 5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

• The hallmark of 2014 so far has been a disconcertingly narrow range in rates.  Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower.
  
  
• As of June, rates are now lower year-over-year, but that's mostly due to rates' path higher in 2013.  The current path in 2014 remains sideways, though it has recently approached (but not broken) the lows set in late May
  
  
• European markets continue to play a prominent role, generally helping rates in the US remain lower than they otherwise might be. 
  
  
• From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range.  While top tier rates moved up an eighth of a point in early September, to truly move out of the "narrow range," we'd need to see another .125% higher (best-execution at 4.375%)
  
  
• 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).