Mortgage Rates improved marginally from yesterday's new all-time lows. Without any major scheduled events to digest, bond markets were left to their own devices and paid a decent amount of attention to a sell-off in stocks. When yields in the broader bond markets move lower, MBS (the "mortgage-backed securities" that most directly influence lenders' rates) tend to move lower in yield as well, allowing lenders to off lower costs, lower rates, or a combination of the two.
With the recent move lower to a 3.75% Best-Execution level for 30yr Fixed Conventional loans, today's improvements were seen more in the form of decreased borrowing costs, or increased lender credit, as the case may be. If you're a first-time or even frequent reader looking for a bit more clarity on "best-execution," we just updated the background page: What is A Best-Execution Mortgage Rate?
For a long time, 3.875% had been "the wall" for Best-Execution mortgage rates. We'd seen fleeting moments of 3.75% on a few days in late January and early February, but nothing sustainable. That makes today record-breaking, in the sense that we're now in the longest stretch of consecutive days with a 3.75% Best-Execution rate for 30yr Fixed Conventional loans.
One of the reasons for the long-standing "wall" was/is the structure of the mortgage-backed-securities market. We've talked extensively about "buckets" in the past (read more HERE) and the difficulties associated with getting newer and lower buckets 'open for business' is at the core of this structural problem. Recent market movements driven by Euro-zone panic and increased possibilities of further Fed stimulus have been persistent enough as to increase the water-level in that previously relatively empty bucket. It's a slow process to fill it, and will continue to be, but it has been happening piece by piece.
Here's the important point of this discussion: That bucket has to CONTINUE to be a safe and logical place for investors to keep their metaphorical 'water,' and that phenomenon relies on European panic generally remaining high and the domestic economy generally moving sideways to backwards as opposed to progressing slowly. This CAN happen, and rates could move even lower as a result. Even without 10yr yields moving lower, mortgage rates could benefit simply from some assurance that other interest rates have reason to stay where they are.
Whether or not that's a risk worth waiting for is less certain. Forced to rely mostly on past precedent, and to some extent in the assumptions about the structure of the mortgage market, we CAN BE reasonably sure that given an ideal interest rate scenario, mortgage rates will not move lower at this point as fast as they would move higher given merely a moderately negative scenario. In other words, we're definitely not ruling out further improvement, but we are making not that there has been and will continue to be diminishing returns on the risk of waiting for it.
Loan Originator Perspective With Rates At All Time Lows
Brett Boyke, Senior Mortgage Banker, Wintrust Mortgage
From past experience this is a nervous time for both borrowers and loan officers - when rates are on the precipice of breaking new lows, borrowers are nervous about locking in to early in fear of missing out on a better rate/fee combo. Conversely, loan officers can't know for sure if this type of move is a flash in the pan or the beginning of a sustained march lower. Thus making our jobs more difficult as a trusted advisor.
Julian Hebron Branch Manager, Loan Agent, RPM Mortgage
We're near the low but Treasury techs suggest a few ticks lower for MBS and rates is possible. The "when" is harder to determine. Consumers can't go wrong with current record lows but if you're going to wait, at least study the Refi Roadmap now so you can avoid surprises
Mike Owens, Partner with HorizonFinancial, Inc.
I've always been a lock it and play it safe originator, but right now I'm 50/50. Rates just keep edging down and I'm actually going to floating short term just to see what plays out. The lock trigger is ready in case, but floating seems safe for now.
Bob Van Gilder, Originator, Finance One
It is the best time in history to take advantage of unprecedented low mortgage interest rates. Some think, "I'll wait, rates will go lower." That kind of thinking often results in missing out. If you like what you are being quoted by a reputable professional, take it! And remember, patience is key in this new Lending environment.
Matt Hodges Loan Officer, Presidential Mortgage Group
I've said it before - if you have an attractive offered rate which improves your situation like lowering your payment significantly or provides some cash out for renovations, take it and don't look back. Chasing the bottom of the rates is a losing proposition. You might get lucky, but at all time lows, chances are better that you will end up with a higher rate than you hoped.
Ted Rood, Senior Mortgage Consultant, Wintrust
Bought some gas here yesterday at $3.47. Crude continues to drop, yet gas is $3.69 today. Lesson here is that user prices for both mortgages and gas don't always behave logically. If you've got pricing you're happy with, take the money and run!
Victor Burek, Mortgage Planner, Benchmark Mortgage
With mortgage rates at these levels, how can you not lock? Rates have held at these levels for a few days and pressure is building. If the pressure gives and rates move higher, they will move higher very quickly. Many consumers want to lock at the rock bottom, but one very large problem with that is you don't know the bottom is here until it is gone, then its too late.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 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).