Mortgages Rates got crushed today, relatively speaking. It's ironic that we noted yesterday's rates as getting close to 3/13's levels because today's rates are turning out to be closer to 3/14's significantly worse levels. While the recently prevailing Conventional 30yr Fixed Best Execution Rate of 4.0% remains intact, costs to obtain that rate will be immensely higher today vs yesterday. More than a few lenders will have issues hitting that 4.0% mark with a "no closing cost" loan.
(read more about Best-Execution calculations).
Adding to the sense of irony in comparing today and yesterday to 3/13 and 3/14 is that the same core event is a factor in both instances. Just like the last major example volatility in rates, today was courtesy of underlying markets interpreting Fed policy (via today's release of the Meeting Minutes from 3/13) as LESS LIKELY to conduct a third round of large-scale asset purchases.
This so-called quantitative easing is widely seen as a net-positive for longer term interest rates. If investors think the Fed isn't planning on a third round ("QE3"), they bet less aggressively on lower long term rates in anticipation that the Fed won't continue to be in the market acting as a large, regular, guaranteed buyer.
With respect to interest rates, a "buyer" creates demand that raises the prices of underlying securities in the bond market. When prices rise, yields (or RATES) fall). MBS, or the "Mortgage-Backed Securities" that most directly influence mortgage rates, are part of same Fixed-Income sector and actually part of the Fed's easing efforts.
So in a nutshell, the perception that the Fed is less likely to be a buyer in the future is causing investors to revalue various Fixed-Income investments such as MBS, and the result is significantly lower prices and somewhat higher mortgage rates.
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).