Mortgage Rates moved lower today, bringing them yet again to new all-time lows. The interest rate environment was generally improved right from the start today as European benchmark rates hit all-time lows. What little economic data we received was not enough to nudge us off the trends set in motion overnight and by this afternoon, MBS (the "mortgage-backed securities" that most directly influence mortgage rates) hit their all time highs.
When MBS prices move up, interest rates for mortgages tend to move down. So logically then, all-time highs for MBS prices fit well with all time low interest rates. Not every lender had an improved rate sheet today. Some were completely unchanged and others were very slightly weaker, but on average, the borrowing costs for prevailing interest rates moved modestly lower. This keeps Best-Execution on Conventional 30-yr Fixed loans in the 3.5% neighborhood for the best-priced lenders though 3.625% remains in the mix.
(Read More:What is A Best-Execution Mortgage Rate?)
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
Brett Boyke, Senior Mortgage Banker, Wintrust Mortgage
With rates at all time low, there is a surprising degree of complacency. There just isn't the same sense of urgency right now as there was in the past. Reading between the lines, I think people are either thinking rates will continue to go down, or they have refi exhaustion...
Julian Hebron, Branch Manager, Loan Agent, RPM Mortgage
Locking purchases as they ratify to capture current lows for clients whose purchase contracts dictate a specific timeline. Decisions to lock refis are specific to each client. If they've recently closed a purchase or previous refi (thus rate is only slightly higher than current market), it's either a float or a no-cost refi depending on breakeven math for closing fees spent previously. If they haven't refinanced in awhile (thus rate is much higher than current market), it's a lock---whether those locks are cost or no-cost also depends on math best suited to client profile and expected time horizon in the loan and/or home.
Bob Van Gilder (BVG), Finance One Mortgage
LOCK/LOCK/LOCK!!!! Rates will go up. (don't know when, but they will)
Victor Burek at Benchmark Mortgage
I continue to believe that floating til within 15 days of closing is the best strategy. However, when floating make sure you are in contact with your loan officer in case the market shifts. Rates do rise much quicker than they fall. I believe that rates are going to continue to hold at these levels and slowly slowly move lower as more bad news comes from Europe.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.5% - 3.625%
- FHA/VA -3.5% - 3.75%
- 15 YEAR FIXED - 2.875% - 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).