Mortgage Rates moved lower today as markets largely shied away from risk ahead of this week's meeting of European leaders to discuss the Euro-zone debt crisis. Market participants are skeptical of any major progress and favored the relative safety of bond markets. Increased demand for fixed income securities like Treasuries and Mortgage-Backed-Securities causes prices to rise and rates to fall. Mortgage Rates fell as a result with the Conventional 30yr Fixed Best-Execution Rate at 3.625%. In most cases, today's rates will be the same as Friday's, but with improvements 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?)
This week is busier in terms of scheduled economic data but lacks the big-ticket potential of last week's FOMC Announcement. That's not to say that we won't see a "big-ticket" movement in markets, but whereas we knew that markets were anxious to digest and trade last week's FOMC, there's no comparable event in the current week. That suggests more of a vigilant "watching and waiting" approach for any borrowers currently in the loan process but not yet locked in.
Long Term Guidance: We'd continue to advocate against trying to "get ahead" of current market movements due to the high degree of uncertainty. 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
Julian Hebron, Branch Manager, Loan Agent, RPM Mortgage
Rates should remain steady this week and perhaps drop .125% to record lows at miscellaneous intervals as markets prepare for Thurs/Fri European summit to lay out euro-saving policies. This Growth vs. Austerity debate among politicians creates uncertainty which can drive the MBS safe haven trade, pushing (or holding) rates down. But I should note that "steady" is in a weekly context and you can't be lulled into low rate complacency. MBS are volatile amidst this kind of political/macroeconomic uncertainty and rates do rise .125% to .375% on given "Europe-is-getting-better" days then slowly tick back down. That's gut wrenching if you miss your window. So if you're a rate consumer, you need to work with your lender to identify a rate target with pre-authorization to lock that target. Because if rates start rising, your lender needs to react in minutes, not hours or days.
Ted Rood, Senior Mortgage Consultant, Wintrust Mortgage
My view on lock/float continues to be the same: if we have the pricing we want at time of loan application, typically am advising clients to lock. Yes, rates are awesome and Europe is a hot mess. Why gamble when you're playing with house money (lender paid closing costs at 3.75% ish rates) already?
Mike Owens, Partner with HorizonFinancial, Inc.
Rates are excellent and I don't see a drop coming anytime soon. Lock it up so the risk is off the table.
Bob Van Gilder, Finance One Mortgage
Lock 'em in!! You waited this long, no need to wait any longer. Take advantage of the great rates that are available through your Mortgage Broker.
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).