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Mortgage Rates Slightly Higher Despite Bond Market Improvements
After setting new record lows yesterday, Mortgages Rates
rose slightly today, though 3.875% best-execution remains intact. Rather than affect the prevailing rates being quoted, today's weakness is most likely to be seen in the form of slightly higher borrowing/closing costs for the same rates quoted yesterday (learn more about how we calculate Best-Execution in THIS POST). The increases run counter to today's market movements as well.
Treasury yields are lower again today, and MBS (the "mortgage-backed-securities" that most directly govern interest rates) are slightly improved as well. One reason that loan pricing hasn't adjusted to match that fact is that MBS weakened late in the trading session yesterday. Not all lenders priced that in by issuing adjusted rate sheets, instead reflecting the changes in this morning's rates. The MBS market was indeed weaker this morning, so if we're comparing the time of day that most lenders put out their first rate sheets, today was indeed worse than yesterday. Beyond that objective explanation, we also have to consider the fact that continued rate improvements from all-time lows are going to continue to be slow and hard-fought. Lenders have little incentive to offer lower rates if current offerings are generating more-than-sufficient demand. (read more on this topic in this previous post)
Finally, and although it's not the only other potential factor, this Friday's Employment Situation Report (aka "jobs report," or "NFP") represents a high-risk situation, ESPECIALLY with mortgage rates at or near all-time lows. NFP, which stands for the the reports chief component "Non-Farm-Payrolls" is generally regarded as the single most important piece of economic data each month. Even against the current backdrop of European headlines exerting more and more influence on domestic markets, it's immensely important. Based on where markets sit right now, we think that rates are somewhat vulnerable if the report is better-than expected. In other words, there's a certain natural level of "push-back" at current rate levels anyway, and a bullish jobs report would probably accelerate that.
This, of course, is contingent on the report coming in with better-than-expected results. If the opposite happens, rates could still improve. It's just that those improvements would likely be slower and smaller than the losses would be in the opposite scenario. It's also very much contingent on rates not moving much between now and Thursday afternoon, which may or may not be the case.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.875% mostly, with a few lenders on either side of this
- FHA/VA -3.75%
- 15 YEAR FIXED - 3.25%, some lenders venturing lower, some completely stuck at 3.25%
- 5 YEAR ARMS - 2.625-3.25% depending on the lender
Ongoing Lock/Float Considerations
- Rates and costs continue to operate near all time best levels
- Current levels have experienced increasing resistance in improving much from here
- There are technical reasons for that as well as fundamental reasons
- Lenders tend to get busier when rates are in this "high 3's" level
and can throttle their inbound volume by raising rates or costs.
- While we don't necessarily think rates are destined to go higher,
given the above facts, there seems to be more risk than reward regarding
- But that will always be the case when rates
operating near historic lows
- (As always, please keep in mind
that our talk of Best-Execution always pertains to a completely ideal
scenario. There can be all sorts of reasons that your quoted rate would
not be the same as our average rates, and in those cases, assuming you're following along on
a day to day basis, simply use the Best-Ex levels we quote as a
baseline to track potential movement in your quoted rate).
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