After breaking an impressive streak of improvement yesterday, Mortgage rates are higher again on Friday, but at a slower pace. Additionally, there's an increased level of stratification between lenders. Some rate sheets are actually flat to improved today while others are significantly higher. The more aggressive lenders remain safely in 3.5% Best-Execution territory for 30yr Fixed Conventional Loans, while others have drifted up toward 3.375%
(Read More:What is A Best-Execution Mortgage Rate?)
Market events were surprisingly well-connected to market movements today with the morning economic data playing a role as well as headlines regarding Spain's bank stress tests. The most relevant piece of data this morning was a weaker read on employment in a widely followed regional manufacturing report. That weakness helped rates markets hold their ground earlier in the day.
But that was soon trumped by news that Spain's "worst case scenario" bailout needs were less-than-expected according to newly released stress test results. Stocks rallied and interest rates climbed as the news suggested investors move in a slightly more risk-tolerant direction.
Markets will get an even better look at employment data in the week ahead, with various jobs-related pieces of data available every day of the week, culminating in the all-important Employment Situation Report on Friday. Given that the Fed's purchasing of MBS is driving rates lower, and that the Fed has been clear in linking that stimulus to employment data, AND the fact that the stimulus is open-ended, Friday's data could have a major impact on the recent foray into all-time low interest rates.
Long Term Guidance: While the recently high degree of uncertainty remains very much intact, the Fed's decision to specifically target Mortgage-Backed-Securities in a third round of Quantitative easing provides a supportive undertone for mortgage rates. We'd still advocate not trying to get too far ahead markets. In other words, we wouldn't try to guess how low or how high rates might go before changing course. For now, the trend is supportive and positive for rates, but we're watching it closely for the same sort of paradoxical responses that occurred in 2010. Things look different this time around, but a lot of that has to do with Europe. Rates remain near all time lows and risks of volatility remain high. Those factors suggest that you stay vigilant regarding the day-to-day swings in mortgage rates. If you're floating, set a limit as to how high rates would have to go before you cut your losses and locked. Similarly, set a target of how low rates would have to get before you lock.
Loan Originator Perspectives
"I've been floating this week, but I think that bias will change next week. Also, be patient with your loan officer as they are covered up and turn times are extended. Off the wall requests can be the norm, but just remember you're getting a great rate so you probably won't need to go thru this process again. never say never though. " -Mike Owens, Partner with HorizonFinancial, Inc.
Today's Best-Execution Rates
- 30YR FIXED - 3.25%
- FHA/VA - 3.25% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.75%
- 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 floating
- This 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).