Mortgage rates were steady to slightly higher today, depending where you looked and at what time of day.  The morning hours brought additional pain for rate-watchers as lenders were universally in weaker territory versus yesterday.  Unlike yesterday, the weakness noticeably found its limit early in the day and underlying bond markets didn't lose any additional ground.  A sharp drop in oil prices and foreboding headlines out of Europe helped fuel a flight to the relative safety of bond markets in the afternoon, thus giving lenders room to lower rates. 

The lenders that reissued rate sheets in the afternoon were very close to yesterday's latest levels.  Even so, most of them did not pass along the full scope of the move in underlying markets.  Bottom line: mortgage-backed-securities are now priced better than they were yesterday afternoon, yet the average lender is still priced worse.  That suggests a bit of a head start for tomorrow morning as it's not uncommon for a certain portion of the lender community to hold off on fully adjusting rate sheets for rapidly changing market levels late in the day.

Given that the average rate sheet is still pretty close to yesterday's, there's no change in 3.625% as the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios.  3.5% is still out there, and still quite scarce compared to the end of last week.

Loan Originator Perspective

"I wondered yesterday if this week's losses signaled a pause in rates improving or a market bottom. Today looked all set to confirm that, but afternoon headlines out of Europe helped rates regain some of their composure.  One thing's for sure: volatility is elevated." -Ted Rood, Senior Originator

"It has been a tough couple days for anyone floating; however i would continue to float at this point if not locked. The trend of the past year or so has been for rates to worsen in the days ahead of the employment situation report. Once the report is released, rates rally. I think that trend will continue. In the big picture, nothing has changed and the trend is still indicating lower rates ahead." -Victor Burek, Open Mortgage

"We seem to have tested the upper range on Treasuries today with success. I feel that we’re at the higher end of the recent rate range so there should be some room for improvement in the near term. I think 1.66 or below is a good level to lock at while anything near 1.84 should be passed on for now. Any meaningful break above 1.84 would change my stance on short term rates so this is a level I’m watching closely. This is a small range so risk vs. reward should be considered and current levels are still some of the best rates we’ve seen in a very long time. " -Jason B. Anker Vice President, Mortgage Lender

"Rates worsened again today which is expected after such a great run. It does appear the decline in mortgage bonds may be slowing down if not over for the moment. All eyes will be on Fridays jobs report. I am currently in the floating camp and feel with support not to far from current levels floating may offer more reward than risk. Things could change quickly so check in daily. " -Manny Gomes, Branch Manager Norcom Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 3.625
  
• FHA/VA - 3.25
  
• 15 YEAR FIXED -  2.875
  
• 5 YEAR ARMS -  2.75 - 3.25% 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).