rates continued higher for the third straight day on Wednesday, bringing them back above levels last seen on Monday, February 25th. Today's move was slightly more brisk than the previous two sessions, as US bond markets were under pressure from both the overnight trading in Europe as well as stronger employment data this morning. Best Execution rates for 30yr Fixed, Conventional loans continues to be 3.625% and today's weakness makes that more uniformly true (as some lenders were approaching viability at 3.5%). That said, 3.5%-3.25% are available, but borrowing costs for those rates have increased more than for 3.625 and 3.75%.
(What is A Best-Execution Mortgage Rate?)
With rates at their best levels in over a month last Friday, and considering the longer term pattern of weakness, taking advantage of the opportunity to lock made good sense. It might seem like three days of weakness "leave room" for rates to make it back to Friday's levels, but in a market that's trending toward higher rates overall, that's not the safest best. There's just as much room for rates to move back to mid-February highs and the outcome of economic data and events over the next two days will likely determine which direction we head. With respect to these particular events, the movements can be relatively larger than what we've seen recently. Combine that potential energy with the defensive biases inherent in the rising rate environment and this makes for a somewhat greater reward if rates improve, but significantly greater pain if rates rise.
Loan Originator Perspectives
"We started the week with a bias toward locking price sensitive clients
and are very cautiously floating clients with more risk tolerance to see
if Treasuries and MBS hold at improved levels from Friday and Monday.
But bonds are selling, and we've now got a lock bias overall. We'd been
touching on .125% lower for a couple days, but now we're back up again,
which brings us the higher levels that have prevailed since mid-January.
It's proving very difficult to see sustained improvement beyond this
recent dip we just had. And if Friday's jobs report beats expectations,
rates may go higher." -Julian Hebron, Branch Manager, RPM Mortgage.
"Way too much risk coming our way to float. ADP was better than
expected and NFP report could be as well. Until some event causes a
flight to safety, floating is dangerous. Will the stock market take a
breather at some point? Maybe and that will help bonds some. Still
lock now and remove the worry." -Mike Owens, Partner, Horizon Financial Inc.
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).