Mortgage rates have been higher every day this week, with Thursday's losses matching the pace of the past few sessions. The overall difference in trading levels of the securities that underlie the mortgage market is fairly minimal, but because bond markets began the day moving into better territory, the afternoon weakness was fairly abrupt. Best-Execution recently moved up to 3.375% from a brief stay at 3.25% and are already close to 3.5% again, a level not seen consistently in more than a month.
(Read More:What is A Best-Execution Mortgage Rate?)
Historically, 3.5% remains close to all-time lows with the 3.25% being the lowest Best-Execution rate on record. That should offer some perspective to anyone thinking they've missed out on an opportunity here. While it's quite true that rates are appreciably higher in the short term, they're still in a lower range than the long-standing 3.875% Best-Execution days that prevailed for most of 2012.
The bigger questions may be "did we just see 3.25% for the last time?" and "when will the current bout of weakness stop?" As far as 3.25% coming back in the future, we haven't yet crossed the lines in the sand that would make us believe that and haven't seen a change in the fundamental landscape suggesting it either. That said, such lines could be crossed before we ever make it back. All we can know is that it doesn't look to be confirmed at this point. As far as the current weakness stopping, we'll probably get a day off from the pain in the next few sessions, but it's tough to know how much lenders will respond to that in terms of rate sheets. Furthermore, even if we get a day off from the weakness, it could ultimately amount to a pause in a prolonged trend that takes weeks to mature, likely either getting reinforced or reversed at next week's FOMC Announcement.
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. 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
"The rate spike this week should remind borrowers not to get too
complacent about rates. This week alone, rates are up .25%. Improving
U.S. economic data, near-term optimism about solutions in Europe, and
fee hikes imposed on lenders by Fannie/Freddie are all factors that are
contributing to higher rates near term. So review your rate targets with
your lender--the rate that you can't or won't go above--and give your
lender a standing order to lock that rate when it's available. That's
the best way to manage this kind of volatility. " -Julian Hebron, Branch Manager, Loan Agent, RPM Mortgage.
"Rates have taken a beating over the last couple days. We have solid
support at the 200 day moving average for the 10 year note just over
1.82. As long as that hold, i would recommend floating, but if it
breaks it could get ugly fast so be prepared to lock." -Victor Burek, Benchmark Mortgage.
"Looks like we have some short covering today in 10-yr TSY futures. The
damage is done in MBS. If you did not lock, you may at this point
considering holding out ONLY if you are closing in the short term (
inside 7 days) You might be able to get .25-.375% in price back. Long
term I still see higher rates. Good luck." -Tim Elkins, CEO, Crossline Capital
Today's Best-Execution Rates
- 30YR FIXED - 3.375%-3.5%
- FHA/VA - 3.25% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 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
- 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).