Mortgage Rates paused their recent trend of moderate improvement today to hold steady near all-time lows. Despite an abundance of domestic economic data out this morning, rates continue to be indirectly fueled by political and economic turmoil in the Euro-zone.
After failing to form a new government, Greece today announced it would hold new elections. Investors fear that those left in power will lead Greece to back-out of the austerity pledges required by the EU and IMF for recent bailout monies as well as Greece's membership in the EU.
If Greece stops receiving that money, they're all but guaranteed to officially default (their recent debt-restructuring was already a default by some standards), and also all but guaranteed to be booted out of the European Union. If those things happen, investors fear a domino effect for the entire Euro-zone, and thus are currently very interested in the relative safety of German and US government debt--a phenomenon sometimes referred to as a "flight-to-safety."
While it's not clear how long European events will keep interest rates low and stable, it is clear that this has been the case, and has resulted in interest rates falling in line with all-time lows.
For only the 2nd day since early February, the Conventional 30yr Fixed Best-Execution Rate is arguably straddling 3.75% and 3.875%. Some lenders' rate sheets are structured such that 3.75% is clearly Best-Execution, though a majority remain at 3.875%. But even among those lenders, 3.75% is an increasingly viable quote (read more about Best-Execution calculations)
Until and unless mortgage rates actually break into NEW all-time lows, we'll likely keep reiterating that which has already been said:
We see two diametrically opposed forces pushing and pulling on mortgage rates here at these key levels. The European component is the obvious force pushing rates down, but less obvious is the underlying structure of the Secondary Mortgage Market providing resistance to moving lower. The latter is what has prevented rates from getting any lower now and in the past.
That said, if the economic outlook remains fairly dim and if European concerns continue to fuel that "flight-to-safety" demand for long enough, the Secondary Mortgage Market CAN slowly evolve to accommodate lower rates. It remains to be seen whether or not it will actually happen. Global economic panic is not our favorite justification for thinking rates will move predictably lower.
Investors in the secondary mortgage market have demonstrated that they tend to feel the same way, having clearly avoided a quick move down into uncharted territory with respect to the "buckets" on the secondary mortgage market. Read more about "buckets" HERE. Without a more stable motivation for low interest rates, we'd expect ongoing progress in creating a market for even lower rates to continue to be slow and small.
Loan Originator Perspective With Rates At All Time Lows
Mike Owens, Partner with HorizonFinancial, Inc.
I always always lock and most of my clients agree it's the save bet. Why play with fire? Rates always rise quicker than they retreat and there is too much upside risk to worry about an1/8 here or an 1/8 there. Rates are lower than any of us have ever seen so why get greedy?
Ted Rood, Senior Mortgage Consultant, Wintrust
The only thing flying high in the land of PIIGS (Portugal, Italy, Ireland, Greece, and Spain) these days is unrest and their bond yields. Biggest issue with domestic mortgages are that lenders may soon clamp down originations as their pipelines swell by raising their rates/pricing. Borrowers who procrastinate on their loans looking for an extra 1/8th% in rate may be rudely surprised when that happens. "Never try to catch a falling knife" is the Wall Street term for this situation. I'm redoing customers at 4.75% on current loans, while others at 6.0% "think about it". Guess thinking is why they're still at 6.0% instead of current 3.75% or so!
Jason Zimmer, Parlay Mortgage & Property
As interest rates continue to remain at all time lows, my advice to all of our borrowers is to lock your loan if you plan on closing within 60 days. Don't look a gift horse in the mouth.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.875% edging down to 3.75%
- FHA/VA -3.75%
- 15 YEAR FIXED - 3.125 edging down to 3.00%
- 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).