Mortgage rates began the day flat to slightly lower before market weakness in the afternoon caused many lenders to release negatively revised rate sheets.  Not all lenders took part in the "reprice," but the net effect is an average Best-Execution rate with borrowing costs very similar to those seen on Friday with some lenders slightly higher in cost while others remain slightly lower.  The most prevalent Best-Execution rate continues to be 3.625%.

(What is A Best-Execution Mortgage Rate?)  

As noted on Friday, interest rates have been moving in an increasingly narrow range since late January, albeit a range that is moving slightly higher.  That's either ominous or promising depending on the direction of the next big move.  In other words, this big, long pause at current levels suggests a certain level of conflict and indecision about were rates should be.  This makes the next move higher or lower more significant in that it's a sort of "verdict" on the recent trend of containment. 

If there's a near-term event that's likely to inspire such a move, it would be tomorrow's release of the "Minutes" from the most recent FOMC meeting at 2pm Eastern time tomorrow.  It's not guaranteed to send rates quickly in either direction, but it certainly has the potency to do so.  Risks of higher rates outweigh the benefits of floating in the hope of lower rates for now.

Loan Originator Perspectives

"The day started off well, with both MBS and actual pricing improved over Friday. This afternoon, however, treasuries and MBS fell off a relatively small cliff and lenders were quick to reprice for the worse. Equities have been up slightly all day. The MBS sell off appears to be defensive in anticipation of tomorrow's Fed minutes. Bottom line, we've been locking loans (in most cases) at submission, and given the market's sentiment the last 6 weeks, that's a good thing!" -Ted Rood, Senior Originator, Wintrust Mortgage.

"Very risky floating into release of minutes from January 30 Fed meeting tomorrow. Remember that the January 3 release of the December 12 Fed rate policy meeting minutes was the catalyst that sent rates .375% higher for 2013. The reason was because those minutes revealed that "several" Fed officials on the policy committee advocated to slow or stop MBS buying (aka QE3) by the end of 2013. This triggered a selloff in the MBS that rates are tied to. Ever since, MBS (and the 10yr Note MBS look to for cues) have sought out a new lower trading range, which has kept rates higher. If Fed minutes reiterate this stance tomorrow, the selling and higher rates could continue. " -Julian Hebron, Branch Manager, RPM Mortgage

"If I have an imminent closing, I would have been locked up long ago. I have a feeling the FOMC minutes will be interest rate positive, but the fact of the matter is this could tip the scale in either direction as we have been chopping along in this range for a while now." -Brett Boyke, Senior Mortgage Banker, Wintrust Mortgage.

Today's Best-Execution Rates

• 30YR FIXED - 3.625%
  
• FHA/VA - 3.25% - 3.5% (varies more between lenders than conventional 30yr Fixed)
• 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 from their all-time lows, making for relatively increased reward for floating at the expense of greater risks of loss.
• Rates could easily move higher or lower, and unscheduled, unexpected events can ultimately have the most say in the direction.
• Near term risks in 2013 include the upcoming debt-ceiling debate in Washington as well as the Fed's policy outlook regarding securities purchases.
• Prospects For Extending The Debt Ceiling Deadline currently seem to be preventing a move back down in rate.  Passage of such legislation could further support a rising rate environment.
• (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).