Mortgage rates continued lower at a steady pace for most lenders today.  The week continues to be slow in terms of domestic events and data, but it has been active in terms of Europe's reaction to the start of European quantitative easing.  Most notably, European bond yields and the Euro itself have taken a sharp turn lower.  Both of those markets tend to correlate with US interest rates, which have benefited only modestly from this week's movement in Europe.  That said, there's no way to know where rates would be going this week if nothing was happening in Europe.  Perhaps they'd be pushing higher (indeed that seemed like a real risk last Friday afternoon).  In that sense, the moderate improvement is warmly welcomed.

One of today's domestic events did coincide with improvement, and that was the afternoon's 10yr Treasury auction.  While mortgage rates are based most directly on mortgage-backed-securities (MBS), movements in Treasuries correlate almost perfectly, though by varying magnitudes.  As such, a sharper move lower in 10yr yields after the auction translated into a slightly less sharp--but still strong--improvement in MBS.  As such, several lenders released improved rate sheets in the afternoon.

We're now firmly back to 3.875% as the most prevalent conventional 30yr fixed quote for top tier scenarios.  Some lenders are still at 4.0% and a scant few are at 3.75%.  Most borrowers would be quoted the same rate today as yesterday, and in those cases, the improvement would be seen in the form of lower closing costs.

Loan Originator Perspective

"So far we have had a couple solid treasury auctions this week which have helped rates to improve. Tomorrow brings us the most important economic data report of the week when Retail Sales is released at 8:30am. A better than expected report can pressure rates higher while a softer report could extend our rally. We also have the last auction of the week. It isnt uncommon to see rates rally once supply has been absorbed. We have seen some solid improvements in pricing over the last couple days, so loans closing in under 15 days should consider locking. If you plan to lock, wait until as late as possible as we are holding at levels that should allow lenders to reprice for the better today." -Victor Burek, Open Mortgage

"Third times the charm? Rate markets recovered a little more ground today, with gains in both treasuries and MBS. We still have some significant resistance levels to break before we get too excited, but a positive day is a positive day! I'll lock a couple today, and watch my floating clients' loans with an eagle eye!" -Ted Rood, Senior Originator

Today's Best-Execution Rates

• 30YR FIXED - 3.875
  
• FHA/VA - 3.5
  
• 15 YEAR FIXED - 3.25
  
• 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 was Europe and the introduction of European quantitative easing.
  
  
• With European QE having now begun, we're on high alert for a big picture bounce in European economic data, sentiment, growth, and rates.  The more it looks like such a bounce is taking hold, the greater the risk that domestic bond markets and mortgage rates will also experience a big bounce higher.  There's already a possibility that the bounce occurred in February, and we'd need to move back to January levels before ruling that out.
  

• While there's no guarantee that the current bounce will prove to be "the big one," it makes better sense from a risk/reward standpoint to assume it will be until that can be ruled out.  That means favoring locking over floating in most scenarios, except when otherwise noted as a tactical opportunity. 
  
  
• 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, conventional 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).