rates moved slightly higher today on average, though a few lenders were unchanged or marginally improved. Some released positively revised rate sheets in the middle of the day as bond markets and MBS (the mortgage-backed-securities that most directly influence rates) improved. Though today's move was slightly weaker, it keeps rates in a consistent range just under their 10-month highs. After having risen to 3.625% in late January, 30yr fixed "best-execution" rates (what is this?) have been persistently stuck between there and 3.75%
In a break from a week and a half of exclusive focus on European headlines, domestic bond markets (which include MBS) actually responded somewhat to today's economic data. The biggest standout here was today' Consumer Confidence numbers, which came in far weaker than expected. Generally speaking, weaker economic conditions tend to prompt improvements in bond prices which bring interest rates down, but rates have been increasingly picky about where they draw inspiration with the ebbs and flows of systemic European risk as well as Fed policy seen as much bigger considerations.
Europe and the Fed aren't going anywhere with respect to being the two biggest considerations for interest rates, however. Instead, today simply provided a reprieve from recent overabundance of headlines out of Europe. That phenomenon could change very quickly in the next few days as Italy is expected generate more than a few headlines regarding important political meetings taking place for the next three days. If the news is positive for Italy, it would likely be negative for US interest rates and could act to solidify 3.625% as a longer term floor for best-execution rates.
Loan Originator Perspectives
"So is Cyprus a template or not, that is the question. If I had a bunch of cash in an EU bank it would be moved by now. That is going to put additional strain on an already weak economy, which should be good for mortgage rates in the long run. the question is when? If I were closing soon, I would be locked up. NFP (jobs) report next Friday has me nervous as it does every month, and that came in well above expectations last month." -Brett Boyke, Senior Mortgage Associate, First Centennial Mortgage.
"Rates range bound today, and that's not a bad thing. With the markets closed on Friday, we don't expect dramatic movement in the next few days. Next week brings the monthly Non Farms Payroll report, between that and Euro-angst, it ought to be an interesting week!" -Ted Rood, Senior Originator, Wintrust Mortgage.
"Europe continues to keep rates low. For mortgage rates to move lower we need the benchmark 10yr to break 1.90. It hasnt been able to do that for quite some time. We speak about ranges and our current range is 1.90 up to 2.06, so we are at the bottom of the current range which is definitely a lock indicator. I would lock if closing within the next 10 days, but would float if closing later to see if more eurodrama can help the 10yr break 1.90." -Victor Burek, Open Mortgage
"I noted Friday that this week could begin with rate locking opportunities for home buyers entering into contract and for refinancers who've provided enough documentation to their lenders to be properly pre-approved. And that has proven to be the case so far this week. No amazing rate improvements, but given the rate spike theme of 2013 (rates are up .375% since mid-January), even flat rates are a welcome change." -Julian Hebron, Branch Manager, RPM Mortgage
"The current momentum in headlines has been favorable, however the pricing both in rates and spreads has not moved as favorably as one would like. That being said it appears that we would need further confirmation for lower rates to exist and the fuel for that move has not revealed itself. We have been trading in a range over the last 60 days between the high 1.8's to the low 2's on the 10 year (buy low/sell high). Our advice is to lock at these levels." -Constantine Floropoulos, Quontic Bank
Today's Best-Execution Rates
- 30YR FIXED - 3.75%, 3.625% coming back into view
- FHA/VA - 3.375-3.5% (varies more between lenders than conventional 30yr
- 15 YEAR FIXED - 3.00%, 2.875% coming back into view.
- 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).