Mortgage Rates moved slightly higher today but only erased a portion of yesterday's improvement. That leaves the Conventional 30yr Fixed Best-Execution rate unchanged and borrowing costs slightly higher than yesterday, but still lower than the previous day.
(Read More:What is A Best-Execution Mortgage Rate?)
Much like yesterday, the domestic economic data regarding Consumer Sentiment, Consumer Spending, or the Chicago manufacturing data were all non-events next to bigger considerations. Today, or overnight rather, the market's focus turned to news that European leaders agreed to allow recapitalization of troubled European banks out of the Euro-zones permanent bailout fund, the European Stability Mechanism, or ESM.
The recapitalization isn't something that will happen overnight, and indeed several countries said "we don't need that now, but might some day! Thanks!" in not so many words. Additionally, the European Central Bank (ECB) noted that none of this can begin until supervision of the program is established--something that should happen by year end. Even so, it's perceived as a small step in the right direction for a European Union that's had a hard time getting on the same page fiscally. Such things tend to encourage better risk-tolerance in markets, generally leading to higher stock prices and bond yields.
Although bond yields did, in fact, rise noticeably in terms of Treasuries, the Mortgage-Backed-Securities (MBS) that most directly influence mortgage rates, experienced a tamer version of the weakness. This is what ultimately allowed mortgage rates to hold on to some of their gains from the previous session whereas Treasuries have given all of theirs back. This "ground holding" is consistent with a bit of a shift in our analysis seen yesterday.
"we're feeling less and less like rates are cutting this narrow, converging path because they're ready to break quickly to one direction or another and more like rates are just really low, really sideways, and will take a lot of convincing before doing something else."
In other words, we're planning on "low and sideways" around current levels until something big happens to change that. All we can do is watch and wait for such things and keep an eye out for upcoming candidates to motivate the potential movement.
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
Mike Owens, Partner with HorizonFinancial, Inc.
I am and will always be a lock and load fan. Floating always leaves the chance of a Titanic type event that I want no part of. Therefore lock in your 20 or 15 year loan and only consider 30 if you really need payment relief.
Ted Rood, Senior Mortgage Consultant, Wintrust Mortgage
Stock market rallies such as today's ordinarily lead to higher mortgage rates as money flows out of bonds and into stocks. The fact that rates are essentially unchanged today is a bullish signal for bond markets, showing strength and probability of continued low rates. Said it before, will say it again, US economy is best of a bad lot, and until our fiscal time bond blows up will continue to be!
Jeff Stats, Network Funding L.P.
I am guiding my customers to lock if closing in the next 30 days. The stored energy poised to affect MBS negatively is simply too great a risk to justify the reward.
Victor Burek at Benchmark Mortgage
The EU summit has come and gone with no real solution, just more can kicking. With the surge in equities, lenders rate sheets were slightly worse this morning. That said, i favor floating all loans over the weekend, then i will continue with my strategy of advising clients to float til within 15 days of closing.
Kent Mikkola #353976, Mortgage Consultant , M & M Mortgage, LLC #213677
Still more to lose than gain by floating, in my opinion.
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).