Mortgage Rates eased to slightly lower levels today after rising abruptly on Friday. The past week and a half saw some of the biggest day-over-day changes to rates since early June and today's gains mean that the volatility continues to be contained by highs seen on July 27th. It's interesting to note that on the beginning of the same week, July 23rd saw the lowest mortgage rates on record.
While recent sessions have been more volatile than most of June and July, it's important to note the RELATIVE nature of that volatility. At most any other point in history, what we now consider to be bigger than average differences in mortgage rates from one day to the next, would be fairly average. But the "new normal" is an extremely tight range at extremely aggressive levels. As such, the Best-Execution Rate for Conventional 30-yr Fixed Loans never broke out of it's recent 3.5% despite the referenced volatility. In other words, the changes in rates haven't been to the rates themselves, but rather to the costs associated with the prevailing rates.
(Read More:What is A Best-Execution Mortgage Rate?)
There's a lot less on the calendar this week in terms of significant, market-moving events. Combined with the fact that last week was a critically important week in terms of data and events, we'd expect many market participants to take advantage of this week for summer vacation time (traders are people too). The lighter participation was certainly evident in today's super low volume trading. The only downside is that low volume can exaggerate movements that would otherwise be smaller
This can be thought of in the sense of larger sample sizes increasing the reliability of data in a scientific experiment/survey. If you survey 3000 people and find that 2/3rds think that Diet Dr Pepper tastes more like regular Dr. Pepper, you'd have a much more reliable result than if you just asked 3 people who preferred regular Dr. Pepper. Same story here... Smaller sample size of traders (and dollars of trading volume even!) leads to trading levels drifting in directions they might not otherwise drift.
These drifts trickle down to the world of mortgage rates if they're large enough. They mostly weren't large enough today to cause many mid-day price changes and those that we did see were positive. The important line in the sand this week is actually best-referenced in 10yr Treasury yields with the recent "bouncing against a ceiling" around 1.592%. Even though it's MBS (Mortgage-Backed-Securities) that more directly influence mortgage rates, 10's can provide a good general overview of how bond markets are moving. We saw that 1.592% level get hit 2 Fridays in a row, but never broken. While it remains unbroken, we stay relatively more insulated against severe risks of deterioration in mortgage rates.
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
Victor Burek at Benchmark Mortgage
Friday: "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.."
Today: "The streak continues, Monday pricing is better than Fridays'. As of mid
afternoon, most lenders have left pricing unchanged from this morning
despite mortgage backed securities moving higher. I would hold off
locking any loan until tomorrow."
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).