Despite the uneventful start to the week yesterday, Mortgages Rates are sharply higher today, rapidly re-introducing 4.0% as the more prevalent Best-Execution rate.  Yesterday, 3.875% was the clear choice for Best-Ex.  Movement between the two has been seen more frequently as rates in general have spent more time hovering in a narrow range between 3.875 and 4.0% on average so far in 2012.  (read more about Best-Execution calculations).

Bond markets began the day in negative territory and continued to weaken until experiencing their worst losses after the FOMC Announcement (Fed Rate Decision).  Although the FOMC Announcement these days is less about "finding out" what the Fed Funds Rate will be (since they've said it will be low through late 2014), they're still one of the most important market movers for Bond Markets, of which MBS (the Mortgage-Backed-Securities that most directly influence mortgage rates) are a part.  

So even though the Fed isn't moving their lending rate, markets still gather clues or direct information as to what their policy changes will be.  Some commentary has suggested that it was once again the ABSENCE of any hints of further quantitative easing that ultimately hurt rates today.  We're skeptical about such an easy answer and see the underlying cause as a sort of perfect storm of events.

Greece just got their bailout approved.  Overnight markets got much better than expected data out of Europe.  Retail Sales were slightly stronger than expected this morning and revised stronger in the previous month.  The FOMC Announcement used slightly more positive verbiage to refer to economic growth.  All of these things are economically positive, and what's good for the economy is generally bad for rates.  

Combine that with the fact that--for lack of a better way to describe it--the trading levels in bond markets were susceptible to this correction by the time this morning's weakness made it's way onto the charts and the post-FOMC weakness seemed almost like a natural move.  What we mean by this is that once fundamental forces in the market caused rates to move higher earlier in the day, there was sort of a logical amount of "room to run" to around 2.13 in 10yr yields. 

Granted, 10yr yields are not what mortgage rates are based on, but their movements tend to correlate much more frequently than they digress.  10yr weakness led the charge today, and mortgage rates followed, albeit in much gentler fashion.  

Rates are either on the verge of moving sharply higher, or they're soon to correct decidedly back into a 3.875% Best-Execution zone.  The frustrating part is that they might look like they're moving higher at first only to bounce back a few weeks later.  If you weren't already locked and have been waiting to do so, rates are STILL close enough to historic lows that floating doesn't make much sense tonight.  Given how close markets have been pushed to the edge of recent ranges, we'll have a much better sense of how the recent range is faring by tomorrow afternoon.



  • 30YR FIXED -  favoring 4.0% now.  Some 3.875%
  • FHA/VA -3.75%
  • 15 YEAR FIXED -  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 floating
  • 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).