Mortgage Rates improved only slightly today despite an aggressive interest rate drop in the broader bond markets.  Lenders' rate sheet offerings are CLOSE but not quite back to their May 17-18 levels which were the best on record.  Best-Execution rate for 30yr Fixed Conventional loans was unchanged at 3.75% with the variations in rates vs yesterday being seen in the form of lower closing costs (or higher lender credits, depending on your scenario).

(Read More: What is A Best-Execution Mortgage Rate? )

(Get Caught Up With: Friday's Post)

As has been the case, the domestic interest rate landscape is chiefly affected by events in Europe, where fears of a systemic sovereign credit failure continue to push the Euro to it's lowest levels in nearly 2 years.  While the peripheral countries experience rising rates, Europe's most stable economy, Germany, sees it's 10yr government debt fall to all time lows day after day.  

US Treasuries are merely "along for the ride," benefiting from spillover jlgy"safe-haven" demand.  When we, as individual consumers in the US want to keep money reasonably safe, we can just put it in the bank, but the amount of money that changes hands in the capital markets isn't conducive to a stop off at the local ATM.  By the time a nominal rate of inflation is taken into account, investors are actually PAYING a small amount of interest to keep their money safe.  

There are other factors pushing and pulling on rates markets, but the bottom line is that Europe is the epicenter of the crisis.  US Treasuries are another degree removed, and further down the line, we have Mortgage-Backed-Securities and ultimately mortgage rates that experience what started out as a "big wave" in Europe, subside to mere ripples by the time the effects on lenders' rate sheets are seen.  We've discussed this general phenomenon more extensively in the past (read more: HERE)

Ongoing Guidance: We'd continue to advocate not trying to "get ahead" of current market movements as a high degree of uncertainty is pervasive.  While it's a reasonably safe assumption that European concerns will generally help rates stay lower than they otherwise would be, that "otherwise would be" part is very much a moving target.  Best bet is to focus on the fact that rates are at their all time lows, and with very close to their all-time low borrowing costs.  Add in the fact that progress has always been increasingly difficult from current levels and risk vs reward for floating vs locking looks a bit larger than we'd like, but not out of the question for those who understand the risks and have an exit strategy if things don't go their way.

Loan Originator Perspective With Rates At All Time Lows

Jason York, Vice President of VA Operations at Prime Mortgage Lending, Inc

Lenders are tapped out, and and don't have much room to give more. So when see rally's like we have today, with the 10yr Treasury at 1.63, you would expect rates to follow suit, but they are slightly better than they were yesterday. I think we will need at least several days staying consistently at these levels before you start to see a larger move by lenders.

Victor Burek Mortgage Planner,  Benchmark Mortgage

Despite the healthy gains with mortgage backed securities, lenders are being quite conservative with passing along the gains. In a way, they are trying to slow down submissions of new loans. We have seen this pattern of behavior before. Don't be surprised if lenders worsen rate sheets in the coming days due to heavy locks. I would recommend if under 30 days to closing to go ahead and lock now. I would definitely float loans closing in over 30 days as that will allow time for some of the loans to clear through the system.

Bob Van Gilder, Originator, FinanceOne

Big rally in MBS land and 10 yr Treasury. Not much improvement, if any, on mortgage rates. Gotta go with, "If you like what you're being offered, go with it."
Rates may improve, but will certainly, go up (at some point).

Ted Rood, Senior Mortgage Consultant,  Wintrust Mortgage

Rates continue to improve as European doubts loom. Pricing is capped, however, by lenders' capacity to process loans. One loan I was floating overnight only gained about $200 improvement in pricing, nice to get it, but not as much as expected.

Julian Hebron, Branch Manager, Loan Agent,  RPM Mortgage

Today is a lock day. This is the type of day that I've been discussing: the true rate lows come and go in minutes as Eurozone debt contagion drives global investors into U.S. Treasuries and mortgage bonds (MBS). It's not to say these kinds of days won't come again, but with this much global market uncertainty, you take the lows when they come.  One other CRITICAL point: Rates on conforming loans to $417k (and high limit conforming to $625,500 by county) are what move throughout each day as MBS trade. Jumbo loans don't move with the markets in this manner because they're not securitized in the same way (and are mostly not securitized at all), so jumbos are priced more by lenders than by mortgage bond market forces. Jumbos are steady today, and could see slight improvement if a rally like this held for 3-5 days.  And finally, if you are locking a loan right now, make sure you read the Refi Roadmap so you know what to expect.

Matt Hodges, Loan Officer,  Presidential Mortgage Group

As a loan officer, you try to provide accurate guidance on movement of and risk tolerance involved with locking/floating interest rates. This is not a science, but an art based on years of data and experience. Given where we are today at record lows, a lock for anyone within 30 days of closing is wise - remember we lose much quicker than we gain. Past that time frame it comes down to risk tolerance of the client. Even as the 10 year Treasury pushes to record low yields and mortgage backed securities push to record high pricing, there is resistance to lower rates. Lenders fear EPOs - early payoff penalties that investors have written into contracts. We may see truly lower rates, but not while demand for refinancing and purchasing remains relatively high.

Brett Boyke, Senior Mortgage Banker, Wintrust Mortgage

The large drop in the 10YR yield has not translated to a move down in mortgage rates at this point. With the Non Farm Payroll report coming on Friday, I think lenders are comfortable in being conservative at this point in the week.

Brent Borcherding, Loan Officer,  Capital M Lending

If you're looking for a compelling case on why to float, it's simple, but by no way guaranteed! Lenders haven't passed on the gains due to a surplus in business and inability to handle a further increase in volume, so there is the obvious potential for improvement over time even if everything else stays as is. Additionally, all of us have heard and lived this long enough that it is hard to imagine that rates could go any lower, after all "this is the lowest rates have ever been". If you remove that bias, and look at the prevailing news and global dilemmas, momentum appears to be moving in the direction of lower rates.  Is it risky to bet on such a thing?  Sure!  But that doesn't mean it couldn't happen.


  • 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).