Mortgage rates moved strongly lower today regaining the territory lost after yesterday's disconcerting move higher. On average, this leaves rates at or near their best levels of the week, which for many lenders, are also the best levels since early August. We speak about "rates" themselves moving higher or lower when in fact, it is merely the costs associated with rates. The actual interest rate quoted for a particular scenario is likely to have been the same all week long whereas the costs have moved up and down--some days more than others.
Rates rallied to a greater extent this morning following the weaker-than-expected Employment Situation Report. The report showed that the economy only added 96k jobs versus expectations of 126k. Markets disregarded the drop in the unemployment rate from 8.3 to 8.1% due to its method of calculation. Simply put, the unemployment rate is technically lower because people who wanted jobs are leaving the workforce.
Despite the bigger improvements in the morning hours, rates markets ran into some resistance before rates had a chance to definitively break into the week's best levels. Several lenders have recalled morning rate sheets and have increased costs slightly. Even after the reprices, the prevailing best-execution rate for 30yr Fixed Conventional loans remains unchanged at 3.5%. On average, most lenders are still in noticeably better territory than yesterday even though some have pulled back from today's morning levels.
(Read More:What is A Best-Execution Mortgage Rate?)
We're not reading too much into today's late weakness, especially considering that the majority of market volume was seen in the morning, but one consideration is that a good bit of uncertainty remains as to next week's big ticket events. As early as late August, we began eyeing the current two weeks as a condensed collection of major market events beginning with yesterday's ECB Announcement and culminating with next week's Fed Announcement. Things could continue to be volatile until then, with more firmly convicted movement potentially following next week's Fed Announcement.
Long Term Guidance: We'd continue to advocate against trying to "get ahead" of current market movements due to the high degree of uncertainty. The long-term direction of rates has been down, down, down, for the past
year. At some point, this will turn, and when it does, we highly
recommend that you're prepared by drawing your OWN line in the
to how much rates would have to rise before you lock at a lost. That's
assuming you don't simply lock as soon as you're able. 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. We'd also consider that rates remain very close to all-time lows and uncertainty to all-time highs. This also favors locking.
Loan Originator Perspectives
Bob Van Gilder (BVG) Finance One Mortgage
Patience continues to be a virtue. New jobs came in at a paltry 96,000
well below most expectations. However the unemployment rate fell to 8.1%
from 8.3%---not good news on either front.(unemployment rate dropped
because folks just stopped looking for non-exisitent jobs-- see NFP)
Hang in there, you will be rewarded with a rate of a lifetime.
Julian Hebron, Branch Manager, Loan Agent, RPM Mortgage
Only upside of worse than expected jobs report is it staved off a
further MBS selloff, and helped rates from going higher following the
ECB bond buying promise yesterday. So rates are holding at lows and rate
lock bias continues to end the week.
Victor Burek, Benchmark Mortgage
I rarely like locking on Friday and today is no exception. Float til Monday.
Mike Owens, Partner with HorizonFinancial, Inc.
Locking has not been a bad thing lately. I still recommend locking to avoid risk simple as that.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.5%
- FHA/VA - 3.5% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.875-3.00%
- 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
- Rates could easily move higher or lower, but given the nearness to
all time lows, there's generally more risk than reward regarding
- 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
- (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).