Mortgage Rates moved higher today continuing a broader trend of weakness that began in late July. Throughout that trend, the actual interest rates being offered to mortgage shoppers haven't moved much and in some cases, would be the same today as they were before the recently higher trend began (the difference being higher closing costs or lower lender credit).
That said, many scenarios would now be looking at the next 0.125% notch higher in rates. Today is the first day since early July where 3.625% is in roughly equal running with 3.5% as the dominant Best-Execution rate for 30yr Fixed Conventional loans.
(Read More:What is A Best-Execution Mortgage Rate?)
We noted on Friday that it remained to be seen whether or not a small positive correction was the first step in bouncing back lower from recent weakness or if it was merely a course correction within a broader trend leading higher in rates. Unfortunately, this remains unresolved, and certainly, the less pleasant scenario of a broader trend higher in rates feels more risky on days like today where that trend is expanded to recently unexplored highs in 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. For those with lower levels of risk tolerance who would consider movements in cost (despite unchanged interest rates) to be significant, or for those within 15 days of closing, or who are purchasing, this certainly favors locking. For those with longer timelines, less urgency to refinance, or wider ranges of risk tolerance, we'd note the generally "depressed" rate environment due to the European crisis and simply keep our eyes peeled for the major changes in European policy that result in noticeable changes in Best-Execution mortgage rates (i.e. the actual quoted RATE is moving as opposed to simply the COST). In either scenario, we'd consider that rates remain very close to all-time lows.
Loan Originator Perspectives
Ted Rood, Wintrust Mortgage
Rates are up, and can't say that's a big surprise. If you're floating,
be prepared to cut your losses at some point. Until the next Euro-bomb
hits, look for rates to continue upward. Don't be greedy, won't help to
mourn for rates you can no longer get!
Victor Burek at Benchmark Mortgage
Very risky floating in this environment. It seems the move higher in
rates is not justified, but you cant fight the trend. My best advice
would be to ask your loan officer about a no closing cost loan. On a
no cost loan, you take a slightly higher rate, about 1/2% and the loan
originator pays your costs for you with no fees being rolled into loan.
I suggest this as i feel the lowest rates will be sometime next year.
At that time, i would advise refinancing again but paying the costs to
secure the lowest rate.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.5% - 3.625%
- FHA/VA - 3.375%-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).