Mortgage Rates bounced back into slightly lower territory after rising abruptly on Friday afternoon. Thursday and Friday of last week marked the biggest 2-day move higher in rates since March, but unlike then, the current move took place very close to all-time lows on Wednesday. We begin the week in stronger territory in terms of markets, but with lenders still slightly hesitant to pass along all of the improvement to rate sheets. Nevertheless, Best-Execution for 30yr Fixed Conventional loans remains at 3.5% with some of the best-priced lenders still close to 3.375%.
(Read More:What is A Best-Execution Mortgage Rate?)
Part of the "long term guidance" section below discusses "going with the flow of gradually lower rates until we see the pattern definitively break." Friday was the first major risk of such a definitive break since early June. If rates were higher again today, we may well have been discussing a break and be changing the ongoing guidance to a more cautious tone. As it stands, we're still well within the scope of the long-term trend, but that doesn't mean that it will necessarily be a long time between now and the next threat to the pattern.
The best candidates for confirming or changing the prevailing pattern of "low and sideways" will arrive in the last 3 days of the week with important central bank announcements at home and abroad, as well as the important Employment Situation Report on Friday. The frustrating thing about this week's big-ticket events is that Wednesday might make it look like we're heading one direction and Thursday might completely reverse that move.
If you missed the opportunity to lock on Friday and were surprised at how much higher rates moved, today might be your chance to take that uncertainty off the table with a rate that's at-least closer to Thursday's. If, on the other hand, the difference in rates between Thursday and Friday of last week weren't disconcerting for you, then you may well wish to ride further into the storm of data and events later in the week. If you do, just be sure to get on the same page with your mortgage professional about the lock process and what the realistic time frame would be from deciding to lock and your mortgage professional being able to accommodate that.
Long Term Guidance: We'd continue to advocate against trying to "get ahead" of current market movements due to the high degree of uncertainty. In the past, we would have interpreted that advice as a suggestion to lock, but in the recently "low and sideways" environment, it's probably better-read as a suggestion to go with the flow of gradually lower rates until we see the pattern definitively break. It's a reasonably safe assumption that European concerns will generally continue to apply downward pressure on rates although there are no guarantees that the right piece of news or economic event couldn't mark "the turning point" at which rates bottom out. On any given day, rates have been at or near all-time lows and in the grand scheme of things, unable to move lower as quickly as Treasuries for example. So although there is potential gain from floating, it's still a historically excellent time to lock if you'd prefer to take the risk off the table.
Loan Originator Perspectives
Constantine Floropoulos, Quontic Bank
We have been consistent in advising our clients to lock as soon as
possible. The risk vs reward factor has been evident in the environment
we are in. For any of our clients floating into the recent sell off on
Thursday & Friday, we strongly advise not to lock, as we feel
confident that the market is not going to get away from them. In
theory, you should never sell a stock on a down day, same concept with
locking, look to lock on an up day (up in MBS, down in treasury yields).
Victor Burek at Benchmark Mortgage
Mortgage rates rallied today, but as always lenders are slow to pass
along improvements making locking today undesirable. With high risk
events coming later this week on Thursday and Friday, i definitely favor
floating all loans until tomorrow. I feel you have very little to risk
floating over night. If you must lock today, wait until as late as
possible as many lenders still have not issued new pricing based on
current price of MBS.
Mike Owens, Partner with HorizonFinancial, Inc.
I am still advising to lock. We have not recovered from Fridays sell
off and anyone floating can not get the same deal they could Friday
morning. I'm glad I didn't have any floaters. Lastly, the
developments in Europe this weeks could have an equally ugly effect on
rates even if the situation has not truly changed. Rates rise much
faster than they fall and we may not get back what has already been
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.5%, Some Approaching 3.375%
- FHA/VA - 3.25-3.5% (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).