Mortgage Rates erased yesterday's losses today, moving lower to fall in line with Tuesday's levels. This ends a rather abrupt 3-day rise from the lowest rates of all time, essentially getting us back near the middle ground of the week. Even at their highest levels of the week yesterday, rates had not yet made it back to previously dominant Best-Execution level of 3.875%, opting instead for 3.75%. That continues to be the case today, but some of the more aggressive lenders are arguably at 3.625%.
(Read More:What is A Best-Execution Mortgage Rate?)
Today's market movements were surprisingly calm given the high level of anticipation for Fed Chairman Bernanke's congressional testimony. Markets hoped to get clues to the likelihood of upcoming Fed policy changes, but generally were given nothing more and nothing less than they expected. This left the bond markets that underpin the secondary mortgage market to drift mostly sideways, but at slightly stronger levels as yesterday's uncertainty and anticipation no longer weighed prices down. (When prices of mortgage-backed-securities are lower, rates move higher, and vice versa).
We spoke yesterday about the 10yr Treasury yield being useful during uncertain times with large potential shifts as a better big-picture indicator of "the bond market" than mortgages, and that it had just returned to a longer-term point of relative neutrality at 1.67% in preparation for today's Bernanke speech. With the speech failing to "spook" bond markets, everything has just sort of drifted back into lower-rate territory, but only slightly! The more convincing thesis is that UNCERTAINTY REMAINS and it's not likely get a major dose of clarity until next weekend's elections in Greece and the following week's official Fed Announcement, unless an unscheduled and probably European headline punches through the barrier of relevance in the meantime.
The moral of the story is that today's small victory provides a bit of breathing room for those inclined towards the higher-risk option of floating in the current environment, but the distance of that breathing room doesn't necessarily mean tomorrow morning's rates couldn't be worse than yesterday's, or that next week won't be volatile within a range.
Long Term 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
Curt Sandfort, President of Premier Home Loans
We are still recommending a "lock" strategy at time of application. The risk/reward of floating at these levels is just not worth the gamble. Lock, be happy.
Jason York, Vice President of VA Operations at Prime Mortgage Lending, Inc
Today is a perfect example of how the market has been for quite a while. We've lost big the past few days, but today we made up for some of those losses. Same opinions still apply. If you have a shorter term, then I would lean more towards locking on a better day like today. If you have more time to see if tomorrow continues to get better, but have enough time to recoup if it doesn't, then floating isn't a bad decision either.
Ted Rood, Senior Mortgage Consultant, Wintrust Mortgage
It's like Groundhog Day in June, rates improve a little on economic turmoil. Never heard of anything like that before! Chairman Bernake's testimony to Senate was well received by bond markets. If you're floating might be time to look at locking. We're recovered much of the ground lost since last Friday, not sure how much more room there is to improve further.
Mike Owens, Partner with HorizonFinancial, Inc.
Lock while we still have a chance. It's only up from here.
Ethan Brizzi, Branch Manager, Professional Mortgage Associates
It is all dependent on your scenario, but why take the risk? Trying to "time" the market is not an exact science - there are too many variables in play, pure data is no longer the driving force behind the rates. I am advising most of my clients to lock - either 30 or 45 days, depending on their scenarios - but as always, I can only give my perspective - its up to them to decide.
Jeff Statz, Mortgage Advisor, Network Funding LP
The mass volume locked earlier this week created a hefty supply that is slowly working its way through processing. I posted optimism on Tuesday about pricing recovering from the large supply, and that's what I believe we're seeing. Slow and steady wins the race.
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).