Mortgage Rates shot decisively to new all-time lows today as bond markets rallied on European headlines. There was nothing on the domestic economic calendar today and the corporate earnings calendar was largely overshadowed by trading patterns set in motion overnight. The hot topic today was the approval of Spain's €100 bln bank recapitalization although that turned out to merely be the icing on the cake. Concerns over Greece's ongoing funding discussions and rising sovereign yields in the Euro-zone periphery already set the tone by the time the Spain news hit. Essentially Europe set the ball in motion for today's all-time low mortgage rates, and the rest of the day has just been about markets getting caught up with the movement.
Today's movement in rates versus the previous day was appreciably larger than most day-over-day moves in recent weeks. Best-Execution rates for 30yr Fixed, Conventional loans had arguably moved down to 3.5% after having been in a range between there and 3.625%. But today's move not only solidifies the 3.5% Best-Ex, but introduces the possibility for top-tier scenarios at top-tier lenders to be seeing 3.375% Best-Ex. We would certainly note, however, that 3.5% remains a more efficient combination of rate and fee, even among those lenders.
(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
Ethan Brizzi, Branch Manager, Professional Mortgage Associates
The theme seems to keep on playing, its almost a game of musical chairs. Not sure when its going to fall, but if you have the stomach for it - depending on your scenario - then its your nickle. For me, I tell my clients that I like to go to a casino to gamble, if the rate is good, then lets lock. If not, then we can float - but it all depends on the file. Purchases with set close dates need to be handled very carefully; no one wants to pay a per diem just to save a little money on the rate cost, right?
Victor Burek at Benchmark Mortgage
Nothing has changed with my outlook...rates heading lower and its a Friday. Float everything until Monday, then lock if within 15 days of closing.
Bob Van Gilder, Finance One Mortgage
Why do rates continue to be at "all time lows" every other day, why? I dunno, but if you are in the mortgage game (refinancing or purchasing) you gotta be clicking your heels in glee!
Brent Borcherding Capital M Lending
It is very difficult to ignore the slow and steady trend towards lower rates, and equally difficult to tell a client to float when rates are at historical lows. However, that is exactly what I'm doing. Float.
Julian Hebron, Loan Agent, Branch Manager, RPM Mortgage
A reminder today that Spain and other eurozone countries are still buckling under excessive debt caused European bonds to sell off and U.S. mortgage bonds to rally. Rates drop when bond prices rise like this. These are the blips that make the "should I lock or wait for lower rates?" question so hard to answer. My summary a couple days ago encapsulates the way we're working with clients to manage this volatility: "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."
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.5%
- FHA/VA - 3.5% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.75 - 2.875%
- 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).