Mortgage rates moved gently lower to begin the week (and month), ending a two day run toward higher rates on Thursday and Friday. Trading levels in the secondary mortgage market began the day in the same territory as Friday afternoon and gradually improved throughout the day. Best-Execution for 30yr Fixed Conventional Loans remains at 3.25% for the aggressive lenders and still struggling to move lower from 3.375% among more conservatively priced lenders.
(Read More:What is A Best-Execution Mortgage Rate?)
As we move into October, there are a few big considerations on our radar. An extremely important even at the beginning of every month is the official Employment Situation Report. That will be coming up this Friday, and it coincides with the other big consideration: past precedent.
Over the past few years, the month of October has been a bad one for mortgage rates. In both 2009 and 2010, October marked the low point for interest rates. In 2011, it was early October that first gave pause to the most decisive move toward lower rates in modern economic history.
While the 2011 version of October problems only lasted 1 month, the previous two examples proved to be much more challenging for mortgage borrowers trying to land a low rate. Although past precedent doesn't guarantee anything about the future, it's reason enough to be extra cautious, or at least extra vigilant this week and the next. Keep in mind that Friday morning's employment data will be out before lender's rate sheets.
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
"Rates continue marching lower today despite green on Wall Street. Not
sure when the MBS market comes tumbling down, but enjoying rates in the
low 3's while they last." -Ted Rood, Senior Originator, Bank Star.
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).