Mortgage Rates fell decidedly to new all-time lows today after a much weaker-than-expected Employment Situation Report. Because of today's movement, Best-Execution rates for 30yr Fixed Conventional loans have fallen to 3.625% from the 3.75% level they only recently attained. Until recently 3.875% was the long-standing floor for Best-Execution rates with only a few brief glimpses of 3.75%
(Read More: What is A Best-Execution Mortgage Rate? )
As we noted yesterday (Get Caught Up With: Yesterday's Post), bond markets stood a good chance to take a break from paying quite so much attention to the situation in Europe and instead focus on the all-important Employment Situation Report (aka "NFP" or simply, "The Jobs Report"). This turned out to be exactly the case as a lackluster read on the economy increased bets that the Fed would announce more quantitative easing focused on the bond markets affecting mortgage rates.
Unlike some of the recent rallies in the world of interest rates, where we've painfully witnessed Treasuries improving much more quickly than mortgage rates (read more: HERE), today's improvements brought mortgages along for the ride to a much greater extent. One probable reason for this is that the Fed has already chosen to direct stimulus specifically at the mortgage market, whereas the improvements earlier in the week were more driven by a general sense of panic stemming from Europe.
So if domestic economic data makes investors think the Fed's more likely to add or prolong easing efforts, and if several Fed governors have mentioned the Mortgage sector as a good potential candidate for further stimulus, mortgages (specifically, "mortgage-backed-securities" or MBS) have a better day relative to their recent performance.
We wish we could guarantee that rates will move lower and that you should hold off on locking because of that. As we noted previously, from a mathematical standpoint, that's more likely to be the case given the current set of variables in play. But it's important to realize that the current rate environment is NOT a product of economic fundamentals and that there's a high degree of panic, uncertainty, and hesitation baked into the low rates as the world waits to see how the situation in the Euro-zone will play out. In other words, things can change in the blink of an eye, but we do think that they'll probably stay well-contained compared to historical examples of "record levels" ahead of the June 17th elections in Greece and the June 20th FOMC Announcement.
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 can change quickly based on events that aren't "scheduled" or able to be forecast. 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
Victor Burek Mortgage Planner, Benchmark Mortgage
Today's rate sheets are the best ever!!!! Rates could move lower, but we are already seeing lenders worsen rates to slow down submissions. if your lender has passed along decent improvements in price, i would strongly recommend locking if closing within 30 days.
Matt Hodges, Loan Officer, Presidential Mortgage Group
My recommendation remains - lock if at 30 days or less until closing. We've gained significantly over the past weeks and one sign of promise from Europe could erase a chunk of that - easily raising rates .125-.25%.
Ted Rood, Senior Mortgage Consultant, Wintrust Mortgage
With today's shock in the Non Farms Payroll report, we've broken some serious resistance in both stocks and bonds. At some point, mortgage pricing comes down to lenders' processing capacities, and as pipelines swell, new loan pricing may suffer. Personal decision to lock or float now, given rates at all time lows. The only certain thing is that NOT starting a refinance now (if you're eligible for the new FHA streamline or HARP programs) will cost you money!
Andy Pada, VP, 1st 2nd Mortgage Co.
One of the few positive by-products of the parade of economic horribles is that mortgage interest rates are at historic lows. I think we may be at the bottom. I would lock in.
Ira Selwin, Vice President of Secondary Marketing, US Mortgage Corporation
Once again, to me it comes down to your risk vs. reward. I always tend to lean toward the "lock" side of things, and I still feel that way. If you have the opportunity to get your rate/payment where it is needed, why risk it? You don't want to be looking back seeing what you should have done. The market can come back the other way very quick, and you don't want to be on that side of it.
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).