After holding steady yesterday, Mortgages Rates moved slightly lower today, hitting their best levels since March 13th. Lender offerings have been sporadic over that time, so not all lenders are back in that territory yet. Best execution is still at 4.0% for 30yr Fixed Conventional Loans, and the improvement is seen in the form of slightly lower closing costs. The buydowns to 3.875% are still too big for it to make sense on a broad enough scale to consider a shift in Best-Execution, but it should be noted that some lenders would be able to structure scenarios lower than 4.0%.
We spoke briefly yesterday on the notion of "efficient combinations" of interest rates and closing costs:
" 'What is the "most efficient combination' of closing costs and payment? Ultimately that will depend on several factors that can vary between scenarios and even between lenders. There's always a COST associated with moving to a lower interest rate, and although rates move in linear 0.125% increments among most lenders, the COSTS to move between those rates can vary greatly.
Right now, it's relatively cheap to go from 4.25% to 4.125% or from 4.125% to 4.0%, but costs increase sharply for the next eighth of a point lower. That's why we note 4.0% as the most efficient combination, even if 3.875% is doable. Above all though, we'd continue to advocate that you assess multiple options to see which fit best for your own sense of efficiency. "
(read more about Best-Execution calculations).
We're more concerned about the momentum of the recent improvement in rates being able to continue after today's trading than we were yesterday. This might seem odd given the fact that rates held steady yesterday but improved today, but underlying levels in bond markets failed to break convincingly into the stronger territory they'd been in before their major movements on 3/13 and 3/14.
Of all the days this week, we see tomorrow as the most dependent on the scheduled economic data to help bond markets decide whether or not they're out of steam following this much-needed correction from weaker mid-month levels. If they are indeed out of steam, that will likely not help mortgage rates tomorrow. Based on the fact that we've recovered quite a bit of lost ground over the past two weeks and that a negative day tomorrow could mark a temporary shift in momentum, today stands out as a safe opportunity to recapture some of those losses. In other words, if you'd been floating over the past two weeks, waiting for things to come back, we're at levels where it's starting to make more sense to lock in those gains without hoping for more.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 4.0%
- FHA/VA -3.75%
- 15 YEAR FIXED - 3.25%-3.375%
- 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
- We're currently further away from the very best levels than we have been in recent months
- We've broken away from a long, stable trend and are expecting greater volatility
- Rates could easily move higher or lower, but given the above facts, there seems to be more risk than reward regarding floating
- (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).