Mortgage Rates bucked their recent trend and moved higher today, though the increase was fairly minimal for most lenders and almost imperceptible at others. Rates faced a tough environment right from the outset today as European markets led domestic bond yields lower overnight. Using 10yr Treasury yields as a rough guide-post for broader rates markets, there's some sense of a pause or a floor at the recent all time lows of 1.442. After hitting those levels for a 2nd time on Monday, broader rates markets have sort of drifted sideways and slightly higher.
Despite that, mortgage rates have done a good job of not losing any ground so far this week. Mortgages don't always follow Treasuries in lock step and depending on the underlying supply and demand situation for MBS (the "mortgage-backed-securities" that most directly influence mortgage rates), mortgage rates can often endure mild rises in Treasury rates without rising themselves. That was unequivocally the case until today, but the higher rate sheets today are still at yesterday's same Best-Execution rates with the only differences being seen in the form of slightly higher borrowing costs (or lower lender credit depending on your scenario)
(Read More:What is A Best-Execution Mortgage Rate?)
Given the sense of the potential "bounce" mentioned above, even if the bounce proves to only be temporary, those on shorter-term time horizons might consider that there is no scheduled economic data tomorrow and that Friday's can sometimes be frustratingly weak in the afternoon. There's no greater probability of that tomorrow, but on the chance that it occurs, it makes the lock/float decision making process that much harder.
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
Matt Hodges, Loan Officer, Presidential Mortgage Group
My lock/float bias hasn't changed. Under 45 days, you like the rate, don't get greedy. Lock it down. Yes, you might get incremental improvements, but also fear the "tapebomb" out of the EU that "fixed" something. Rates move up much quicker than they drop. Historic lows in the mid 3's can't be ignored.
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).