Mortgage Rates rose abruptly today capping a 6 day stretch that has seen the biggest swings of the past 7 weeks. Although the movements seen in several recent sessions have been big relative to what they were previously, they haven't yet resulted in a confirmed change to the prevailing Best-Execution Rate, which remains at 3.5% for most lenders.
(Read More:What is A Best-Execution Mortgage Rate?)
Today's moves resulted from a stronger-than-expected Employment Situation Report as well as developments in Europe that could help shore up financing costs and liquidity in the most at-risk economies. The past two days saw two separate announcements from the Fed as well as the ECB (European Central Bank). Markets had high hopes for one or both of those events, but they turned out to offer very little by way of market moving information.
That was a good thing yesterday as interest rate markets were in better territory, but because of the lack of guidance from those events, increased importance was placed on today's jobs report to give markets something useful to digest. The stronger-than-expected creation of new jobs is generally seen as a positive indication for the economy and usually leads to higher rates.
Today's jobs report also potentially hurt rates in another way. With the Fed considering, but not yet committing to another round of Quantitative Easing (QE), markets are on the lookout for data that could push them in one direction or another. The Fed has explicitly stated that employment data is an important consideration in deciding on new QE, so a stronger jobs report is essentially a vote against further QE. And while this alone, isn't a big enough development to completely alter the QE outlook, it decreases it somewhat, and that means less guaranteed money flowing into the longer maturity US Treasuries or Mortgage-Backed Securities, which most directly influence mortgage rates.
So today's losses were definitely noticeable if you were watching rates from yesterday to today, but they don't yet suggest the "definitive break" of the pattern of generally low, sideways rates that we mention in the long-term guidance below.
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
Brent Borcherding, Capital M Lending
I mentioned yesterday that I'd lock yesterday if my options were then or
today. I didn't see this coming but if there were a risk it was to the
worse. So, what to do moving forward? Float until pricing improves
because it will. Tough move in the short run, but I believe it sets us
up for better pricing next week with even lower rates ahead.
Victor Burek at Benchmark Mortgage
If you risked floating overnight, your pricing is worse...but have no
fear. Looking back over the last 2 months, rates have always been
better on Monday then what we had on Friday.
Bob Van Gilder, Finance One Mortgage
Woulda, coulda, shoulda! Forget it. If you haven't purchased or
refinanced by now, you may have missed the best boat, but others will likely be docking soon.
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).