Mortgage Rates Moving Into High 3's

[Joseph Scorese]

Mortgage Rates Moving Into High 3's

Mortgage rates continued lower today, adding to an already impressive streak of improvement that began in mid-July. Much of that improvement has come courtesy of increasing concerns over the trajectory of global growth and inflation. When investors downgrade their growth outlook, they often move more money into bonds. Greater demand for bonds brings bond prices higher and rates lower.

This was the case today as several pieces of economic data suggested weaker growth and inflation this morning. Markets responded by moving money out of stocks and into bonds. Among the bonds that benefit are the mortgage-backed-securities (MBS) that dictate mortgage rates. With rates already at 2-month lows on Friday, this means the winning streak is simply extended. You'd now have to go back to May 28th to see rates as low as today's. Most lenders are quoting either 3.875% or 4.0% on top tier scenarios for conventional 30yr fixed loans.

As with any streak of solid gains, it can always make sense to lock. That said, there are always certain borrowers that are more risk-tolerant or who are willing to accept the possibility of higher rates in exchange for the chance at lower rates. The risk takers continue to be in a better position over the past few weeks than they had been through mid-July. We're at a point where the longer term trend toward higher rates in 2015 is facing imminent defeat. The catch is that it's the rest of this week's data that may determine that. If the data is stronger than expected, rates could easily snap back higher. Bottom line: lowest rates in 2+ months, and a risk of a bounce back despite a decent enough chance for further gains. Hard to go wrong here as long as you set yourself a limit as to how much you'd be willing to lose before locking at a loss.