Mortgage Rates rose microscopically today as mortgage markets essentially moved sideways just off yesterday's slightly stronger levels, with little news or data driving trade. To emphasize how small the changes are, we'd note that a few lenders are even priced better than yesterday, but the average Best-Execution rate is 0.01 higher. As a vast majority of lenders price in one-eighth (0.125%) increments, this leaves the dominant Best-Execution rate for Conventional 30-yr Fixed loans at 3.625% with the only day-over-day changes being noticeable in the borrowing costs associated with yesterday's rates.
(Read More:What is A Best-Execution Mortgage Rate?)
At this point, concerns surrounding Wednesday's FOMC-related volatility are rapidly fading from focus and markets seem to be searching for their next major source of guidance. The fact that they don't yet have that guidance is obvious due to the lack of directional movement following FOMC this past Wednesday. Everything has just sort of gone sideways for bond markets. Treasuries are noticeably weaker than mortgages today, but were relatively stronger than mortgages following the FOMC events. Today's outperformance by mortgages simply gets things back in line with the pre-FOMC relationship to Treasuries.
Moving sideways is actually a good thing for the mortgage-backed securities (MBS) that most directly affect mortgage rates. When massive amounts of borrowers wish to lock in rates--as we've experienced in recent weeks due to new all-time lows--mortgage lenders have to go through several steps to ensure that the loans can be funded. Some of these steps involve buying and selling MBS on the secondary market. To make a very long, complicated story short, the higher the volatility, the more expensive it becomes for lenders to do that. Two things are needed at the moment if rates are to proceed much lower: a moderate amount of TIME and a moderate amount of STABILITY.
Long Term Guidance: We'd continue to advocate not trying to "get ahead" of curreInnt 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 Perspectives
Victor Burek, Benchmark Mortgage
I will continue to offer the same guidence on locking that i have for the last couple months. If closing within 15 days, lock. If you are closing in more than 15 days, i would suggest continue to float til you get inside the 15 day window. 15 day pricing offers the best terms for borrowers. At this point, i do not see rates rising in the near term. Either sideways or lower.
Jason York, Vice President of VA Operations at Prime Mortgage Lending, Inc.
I can't speak for others, but I am busier than I have ever been, and it is a nice mixture of purchases and refinances. I don't see much incentive for lenders to lower rates, as most are already working at or near capacity, and lowering rates further will only overload them. To break the 3.625% floor, I think it is going to take more of an event than just time. Given just time, I think we continue to teeter-totter back and forth in this range, but some substantial event, I think that could be the only thing that give the market enough conviction to break the floor.
Mike Owens, Partner with HorizonFinancial, Inc.
I'm locking everything for 45 days and some for 60 depending on the investor. Turntimes are pretty long and patience is required. Purchase is still 30 days, but refis take a back seat. I think we're at the floor for rates right now and some lenders have started to push rates up a little to slow down the volume. I equate the process to waiting in line at Disney World on the busiest day of the year. We'll update when appropriate, but no news is the norm right now.
Bob Van Gilder, Finance One Mortgage
Should I lock or should I float? Yes, you should do something!! Get your loan in process. Get lined up to take advantage of a great opportunity before it slips away. (not that I think it'll slip away tomorrow) BUT---Lenders are busy. Procrastination at this point may lead to disappointment.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.625%
- FHA/VA -3.5% - 3.75%
- 15 YEAR FIXED - 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).