December 19, 2012
The tone of Fiscal Cliff news shifted from comprommisory back to combative today, helping Mortgage rates recover from Tuesday's multi-month highs. Interest rates rose quickly on the first two days of the week as markets sensed that Washington was beginning to come together in order to craft a tax and spending plan to avert the Fiscal Cliff before the end of the year. Conventional 30yr Fixed Best-Execution rates are most commonly 3.375% with some lenders an eighth of a point higher or lower.
(Read More:What is A Best-Execution Mortgage Rate?)
Even before politicians had the chance to take the podium today, bond markets were already in the process of bouncing back from their weakest levels since late October. This suggests one of two things. Either markets are waiting for more substantive news out of Washington or the movement over the past two days was more "exploratory" than determined--taking an opportunity to reassure itself about trading range assumptions.
Whatever the case, MBS (the "mortgage-backed securities that most directly influence lenders rates) continue to be a bit less prone to swings compared to bond market benchmarks such as 10yr Treasury yields. This has helped lenders' rate sheets stay centered primarily on a 3.375% Best-Execution rate, but if underlying markets get volatile enough, it wouldn't take long for that to become 3.5%. We think a Fiscal Cliff resolution has the power to effect that sort of change, even if it's short-lived, and would continue to keep that in the back of our minds when considering locking or floating.
Loan Originator Perspectives
"We continue to lock in all of our clients at time of application. We feel there is too much risk in floating given the fiscal cliff uncertainty." -Alan Craft Loan Officer at AcopiaHome Loans.
"Rates recouped some of last few days losses today, but appears we're establishing a new range versus returning to recent lows. Still locking when pricing works (versus floating and risking ability to pay costs for my clients)." -Ted Rood, Senior Originator, Wintrust Mortgage.
Today's Best-Execution Rates
- 30YR FIXED - 3.375%
- FHA/VA - 3.25% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.875% - 2.75%
- 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, but uncertainty surrounding the Fiscal Cliff is applying upward pressure.
- 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).