Mortgage rates barely budged today, but moved in the right direction on average.  Several lenders were actually slightly higher in rate, but most lenders improved.  This technically brings rates to another 3-week low, and the best levels since October 24th.  Again though, this isn't necessarily true for every individual lender due to the narrow overall range and small day-to-day movement. Adjusting for changes in closing costs, conforming 30yr fixed rates only made it 0.01% lower today with the benefit of rounding.  The most prevalent quote for top tier borrowers is 4.0%, followed by 4.125%.  In isolated cases, some borrowers are seeing 3.875% again.

When we talk about rates being the lowest in 3 weeks and then throw in all these caveats, it might seem like there's not much to cheer.  But this strength--moderate though it may be--is actually rather resilient given some of the headwinds in broader bond markets. 

Mortgage rates are based most-directly on Mortgage-backed securities (MBS), which in turn tend to trade very similarly to US Treasuries.  Treasuries have been under pressure due to their role as a benchmark for the corporate bond market (big companies issuing debt, i.e. investors paying cash to Big Company A in exchange for fixed payments with interest).  As record amounts of corporate bonds hit the market this month, not only are there more fixed-income investments out there to compete with mortgages and Treasuries, but the issuance process itself puts some upward pressure on Treasury yields (the reason for this is fairly abstruse, but suffice it to say these companies can protect themselves from market volatility during their bond sales by selling Treasuries.  More selling results in lower prices and higher yields/rates).

Bottom line, Treasuries have endured that activity fairly well, and mortgages have endured the Treasury volatility quite well in turn.  If one were so inclined, those examples of resilience could be taken as some sort of clue about underlying positivity waiting for its chance to express itself.

Sadly, things are never that simple when it comes to mortgage rates or financial markets because this one topic doesn't exist in a vacuum.  While that resilience probably does indeed suggest some latent positivity, other events can create an equal or greater amount of negativity depending on how they unfold.  So it ends up being one of those 'all things being equal' sort of thoughts. 

It's also a timely thought as the Fed is set to release the Minutes from its most recent meeting and policy announcement tomorrow afternoon.  While there isn't much hype for this one, official Fed events always have the potential to cause significant market movement.  With rates at 3-week lows, there's no harm in favoring locking vs floating.  But of course with all the aforementioned resilience in mind, risk-takers are justified in holding off, as long as they're willing to cut their losses if markets happen to move against them.

Loan Originator Perspective

"Mortgage rates have been indecisive recently, and that could be good or bad. We have the release of minutes tomorrow from the last Fed meeting which has the potential to create some volatility if we find something surprising within it. I think that is probably unlikely given the result of the meeting (end of QE) was telegraphed a long time ago. But, one can never know. I don't have a strong lock/float conviction at this point so my advice is check your risk tolerance and act accordingly." -Hugh W.Page, Mortgage Banker, Seacoast Bank

"We had a decent day today, holding near the lower end of the recent range.  The big question is whether we'll ever break through to significantly lower rates, or just bounce back up as we've been doing. My locking bias is neutral now, assuming floating clients have some risk tolerance and time before closing. Tight deals, or borrowers who are within 30 days of closing could certainly do worse than locking now." -Ted Rood, Senior Loan Officer, MB Bank

"It appears the bond markets are looking for direction. Both yesterday and today, morning strength gave way to mid day weakness. Nothing dramatic in either direction, just sideways trading. I am continuing with my advice of locking once within 15 days of funding. All other loans will be floating." -Victor Burek, Open Mortgage

"Mortgage bonds continued to move sideways while equities rallied with the S&P breaking above resistance. This could be bad for rates should equities continue to advance. Tomorrow does bring the release of the FOMC minutes which can be market moving. I would float into the Fed Minutes but quickly lock should you see treasury yields move higher after the Fed statement is released." -Manny Gomes, Branch Manager Norcom Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 4.0-4.125
  
• FHA/VA - 3.5-3.75
  
• 15 YEAR FIXED -  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.  It's too soon to tell if this is a brief window of opportunity or the continuation of 2014's very gradual improvements.
  
  
• 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).