Mortgage Rates moved higher today after the Fed released a largely unchanged monetary policy statement. Some market participants were hoping that today's FOMC Announcement would include verbiage specifically targeted toward the Mortgage-Backed-Securities (MBS) which most directly influence mortgage rates. Not only did MBS not get that promise of extra Fed support, but interest rates in general were also somewhat disheartened that the Fed chose to leave their target time frame for low interest rates unchanged (i.e. still "late 2014")
If you're interested in the differences between the current and previous FOMC Announcements, we have them all on one page HERE.
The net effect on lenders' rate sheets was fairly minimal in most cases though we noted a higher than normal stratification between lenders. In other words, some lenders moved a lot while others didn't budge. Although the borrowing costs associated with prevailing rates moved higher on average, the Conventional 30yr Fixed Best Execution Rate remains unchanged at 3.5%. Some of the more aggressive lenders continue to offer competitive combinations of rate and fees at 3.375%.
(Read More:What is A Best-Execution Mortgage Rate?)
Today's FOMC Announcement was just the first of 3 major market events taking on the last 3 days of the week. Unlike the Fed today, tomorrow's big news will be out before domestic markets open. The European Central Bank (ECB) will deliver its policy announcement at 7:45am Eastern Time and the running consensus is that it has more potential to move markets than today's FOMC statement.
As with any piece of major market moving data, markets attempt to set up for it as best they can in the sense that they're ready to move in either direction. If markets had overwhelming reason to believe that rates would be better or worse after the ECB news, then they'd have already traded rates according to that consensus. In other words, everything that's known about what the ECB might say is already "priced in" to trading levels. Things could go either way and do so in greater magnitude than they did today.
While we're certainly not anywhere near abandoning our view that rates will continue to be generally low for the foreseeable future, the next two days have the potential to hold that conviction up to the fire for a bit longer than some borrowers might be comfortable with. Bottom line, floating a rate into tomorrow is one of the bigger dice rolls we've seen in the past few months. It could work out well for you, but if it doesn't, it could take longer than usual for a potential bounce back to lower rates to run its course.
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.
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).