Just before reaching fresh multi-month lows, Mortgages Rates rose slightly today after a stronger than expected read on the manufacturing sector. Overall, rates continue to operate at the same "best-execution" level of 3.875% and today's deterioration would instead be seen in the form of slightly higher borrowing costs (or decreased lender credit toward closing costs, depending on your scenario).
Keep in mind that "best-execution" as we calculate it, connotes the no-closing-cost rate for the best-qualified borrowers in the most ideal scenario. (read more about Best-Execution calculations). For many scenarios, 4.0% continues to constitute a good bang for the buck.
Whatever the case, take a look at the the rate and fee structure of adjacent rates. In other words, you may find that paying more up front for a lower rate makes more sense for you due to payment savings. Conversely, maybe you'd rather spend less out of pocket in exchange for a slightly higher payment.
Moving on to markets and movement now... Yesterday we said that we'd expect the level of market activity to pick up as the week progresses, and indeed that was the case after this morning's ISM Manufacturing report came in stronger-than-expected. Economic data has been sort of lackluster recently, and yesterday's data had markets fearing another weak report this morning. So when it surprised to the upside, stocks rallied significantly and interest rates on fixed-income investments generally rose. The MBS ("mortgage backed securities") that most directly influence mortgage rates are part of that fixed-income sector.
Yesterday's stance is actually still the best way to think about the rest of the week for now, and may continue to be, barring any dramatic surprises in data or headlines. Particularly:
Whereas we might see some small movement in either direction throughout the week, things can change abruptly on Friday with the release of The Employment Situation Report. The fact that rates have been so low and so stable is a negative risk in our view. Historically, there's been limited benefit in floating at current levels, and historically, "big news" that follows "flat markets" creates the potential for huge swings. This is not at all to say that rates couldn't or wouldn't improved if the Jobs report was very weak, simply that there's no historical precedent to them improving much beyond current levels and that the Jobs report creates the potential for volatility.
In other words, we have two ingredients. First, there's the fact that historical examples of the Jobs report coming up on Friday have been among the biggest potential market movers on any given month. There are plenty of times where this DOES NOT turn out to be the case, but if you lined up all the various pieces of scheduled data each month next to their corresponding market movements over time, The Employment Situation report would be at the top along with FOMC Announcements.
Second, there's the fact that lenders' rate sheet offerings haven't been much lower than they are currently. Now... "much lower" is subjective, of course. The few hundred dollars in closing cost difference could mean different things to different people. Additionally, certain scenarios that are on "the edge" between two different interest rates (say 4.0% and 3.875%) could actually move down in rate within the confines of the "not much" generality above. But on average, Best-Execution rates for 30yr Conventional loans have been CLOSE to edging down to 3.75, but have never done so on a widespread basis or for more than a day.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.875%
- FHA/VA -3.75%
- 15 YEAR FIXED - 3.125-3.25%
- 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
- Rates could easily move higher or lower, but given the nearness to all time lows, there's generally more risk than reward regarding floating
- But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
- (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).