rates edged gently lower on Friday, bring to a close their best week since mid-January. The catalyst for the relatively more positive week of rate movement--the Italian election results out Monday morning--had their biggest effect on Monday itself with subsequent days either drifting sideways or improving modestly. With today keeping that trend going, best-execution on 30yr Fixed, Conventional Loans is beginning to edge into 3.5% territory for some lenders but remains most commonly at 3.625%. 3.75% will still be a viable option for some scenarios and sub 3.5% rates remain reasonably efficient down to 3.25% ("efficiency" in terms of the extra costs paid to get the rate lower versus the decrease in monthly payments).
(What is A Best-Execution Mortgage Rate?)
The trading day was slow and uneventful for MBS (Mortgage-Backed-Securities that most directly inform mortgage rate movement) as well as Treasuries. Stock prices and Treasury yields were lower in the early morning, but moved higher after stronger-than-expected manufacturing data at 10am. Despite the weakness in bond markets (which include MBS), rates were able to find their footing by 11am, which made lender reprices almost non-existent for better or worse. In general, rates markets didn't respond to economic data much this week, preferring instead to simply consolidate after the Italian election on Monday. This could change next week with Jobs report coming out on Friday. Additionally, the European Central Bank's policy announcement on Thursday morning is another key consideration for global interest rates.
Loan Originator Perspectives
"I am rarely a fan of locking on Fridays and this one is no different. I
believe rates on Monday will be determined by any news we receive over
the weekend regarding the sequester. If we get news that the sequester
cuts are gonna be delayed or eliminated, stocks will rally and rates
will worsen. If we get no news or news that the cuts are going to
happen, then rates should at least hold steady. Its a risk to float, so
base your decision on what you think might happen regarding the
sequester. " -Victor Burek, Open Mortgage.
"This week's opportunities to lock rates .125% lower than they've been
most of 2013 have been sporadic: windows opened Tuesday, yesterday, and
this morning. As of this writing at 10:54 am PT, we're holding at the
lower rate levels. Locking price sensitive clients and very cautiously
floating clients with more risk tolerance to see if Treasuries and MBS
hold at current levels, because if so, rates may improve a bit more." -Julian Hebron, Branch Manager, RPM Mortgage.
"The sequester cuts may cause delays in HUD/FHA as well as Fannie and
Freddie. These delays may ostensibly result in higher costs per loan.
Therefore, I wouldn't be surprised if rates and pricing take a hit. I
would be locking today." -Andy Pada, VP - 1st 2nd Mortgage Co.
"Never was a fan of locking into the weekend, never was a fan of floating
into the weekend. These decisions are always difficult. Next week's
employment report should be a market mover, I will take my chances as
the momentum has been in our favor thus far." -Constantine Floropoulos, Quontic Bank
Today's Best-Execution Rates
- 30YR FIXED - 3.625%
- FHA/VA - 3.25% - 3.5% (varies more between lenders than conventional 30yr
- 15 YEAR FIXED - 2.875%- 3.00%
- 5 YEAR ARMS - 2.625-3.25% depending on the lender
Ongoing Lock/Float Considerations
- Rates have risen moderately but consistently since hitting their all-time lows in September and October 2012.
- Regardless of global or domestic economic weakness, the subsiding fear of a disorderly EU breakup will continue to prevent rates from getting back to those lows.
- This is very likely to be the case unless a similarly panic-inducing event were to come into focus, or if a disorderly break-up regained the spotlight.
- Sequestration, negative growth, and generally choppy political and economic environments around the world DO NOT constitute that sort of panic.
- This is a "rising rate environment" until further notice, though pockets of recovery and consolidation can provide smaller-scale opportunities against the larger-scale backdrop.
- (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).