January 9, 2013
Mortgage rates moved slightly lower again today, marking the third straight session of recovery after being launched higher last week. The magnitude of that launch is a matter of perspective, though 30yr Fixed Best-Execution never made it over 3.5%. Today's improvements bring the average rate sheet back into 3.375% territory, but lenders remain on both sides of that (fewer at 3.25%, more at 3.5%). Not every lender improved, and not every improvement will have dropped the quoted rate by the standard .125% increment. That means that many scenarios will see this improvement as a reduction in closing costs (or increase in lender credit).
(Read More:What is A Best-Execution Mortgage Rate?)
The biggest guidance-giver on the calendar for interest rates today was the 10yr Treasury Auction. Mortgage rates aren't based on Treasury rates, but their underlying securities (MBS or "Mortgage-backed-securities") do tend to trade in the same direction as Treasuries. As such a big move in the 10yr yield could have had an impact on mortgage rates as well. Although the auction caused a stir at the market level, the volatility didn't make it's way to rate sheets. Furthermore, underlying markets did a good job of taking the auction in stride. This is disconcerting because it leaves the near-term outlook up in the air (in other words, we don't know what will cause the next big move). In another way, it's heartening to see a slow, steady march back toward lower rates with a seemingly well-developed determination. For those that have taken note of our recent shift in tone regarding risk vs reward, we've definitely recaptured some of that reward since Friday morning.
Loan Originator Perspectives
"Rates are slowing heading back down to 3.375% best execution. This is a hopeful sign considering nothing has really changed from an economic stand point. I think this trend will likely continue. I'm tempted to float, with the trigger within reach. " -Mike Owens, Partner with HorizonFinancial, Inc..
"Today's auction of 10 year notes was average at best, but seems it was good enough to keep the 10year under 1.87, the top of the long term down trend. As long as the 10 year stays below 1.87, i would continue to float and only lock if within a few days of closing." -Victor Burek, Open Mortgage.
"With the treasury and mortgage backed security markets being as quiet as they have in the past week, it feels almost as if they are waiting for some form of a big economic indicator to make the decision on which way to go. Consumers that can benefit from current terms should protect themselves and lock in if closing within 30 days. The energy that has built up over the quiet last week could lead to a strong movement in rates in either direction." -Steve Chizmadia, Mortgage Consultant, American Capital Home Loans
"Rates are only .125% higher than they were before MBS markets panicked last week after learning that a few FOMC members are advocating for an imminent end to Fed MBS buying. Rate shoppers should take this seriously. While economic fundamentals will keep the MBS bid healthy and rates won't spike near term, it's less likely that rates will drop materially from current levels." -Julian Hebron, Branch Manager, RPM Mortgage.
Today's Best-Execution Rates
- 30YR FIXED - 3.375 - 3.5%
- 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 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.
- (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).