Well folks, here we are in the evening hours of Thursday on a week where much has been made of tomorrow morning's employment report (which I'll refer to as NFP from here on out). If yesterday was the knee jerk reaction to data that has some predictive value for tomorrow's data coming in much stronger than expected, then today was the sober moderation of that reaction.
Think of this in terms of a baseball analogy. If a runner on first base, for whatever reason, has an increasing level of believe that he can steal second base, he might increase his lead-off.
If the "runner" represents "the market" and 2nd base represents where the market might go if tomorrow's NFP shows strong job creation, then yesterday's ADP report caused our runner to immediately take a highly aggressive lead off position. But then this morning, that lead shrunk considerably as the market started second guessing itself.
In other words, markets viewed strong ADP results (NFP preview) as greatly increasing the odds that NFP would arrive on Friday morning with much better than expected results. And then this morning we saw some moderation from yesterday's losses, leaving the secondary mortgage market in much more comfortable staging area from which to approach tomorrow's data.
Remember, strong economic data is bearish for the bond market and generally pressures mortgage rates higher.
This is a bit of a double-edged sword because the ground we gained back today leaves room for benchmark rates to move higher or lower tomorrow WITHOUT significantly altering the best execution 30 year fixed mortgage rate.
Plain and Simple: After today's modest correction, benchmark rates are more centrally located and better prepared to move in either direction more nimbly without significantly changing current mortgage rate offerings. This implies it is going to take a real shocker of a report to cause major chaos in mortgage rates. Feels like a let down, but major shockers are the norm lately.
As promised three weeks ago...
The best execution 30 year fixed mortgage rate hasn't really moved outside the recent range. 4.75% is still the most aggressive conventional 30 year fixed mortgage rate we're seeing quoted, though 4.875% is still best execution.
4.875% is "Best Execution" for very well-qualified borrowers seeking a conventional 30 year fixed home loan. 4.75% is best execution on FHA/VA 30 year fixed loans. This is as good as it gets but we still find ourselves swimming in sea of random rate quotes. The primary mortgage market is very segmented at the moment. In reality, the best execution 30 year fixed mortgage rate is in a range between 4.75% and 5.125% with definite chances of phantom offers (very-well qualified borrowers) as low as 4.625% on FHA (4.75% on Conventional loans) and as high as 5.25%. Phantom = elusive. We keep hearing whispers of these quotes but have yet to see proof of aggressive buydown structures.
Important Mortgage Rate Disclaimer: "Bext Execution" is the most efficient combination of note rate and points paid at closing. This note rate is determined based on the time it takes to recover the points you paid at closing (discount) vs. the monthly savings of permanently buying down your mortgage rate by 0.125%. Loan originators will only be able to offer these rates on conforming loan amounts to very well-qualified borrowers who have a middle FICO score over 740 and enough equity in their home to qualify for a refinance or a large enough savings to cover their down payment and closing costs. If the terms of your loan trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will be higher. If you do not fall into the "perfect borrower" category, make sure you ask your loan originator for an explanation of the characteristics that make your loan more expensive. "No point" loan doesn't mean "no cost" loan. The best 30 year fixed conventional/FHA/VA mortgage rates still include closing costs such as: third party fees + title charges + transfer and recordation + escrows (things like upfront MIP (if required), property taxes, homeowners insurance, accrued interest.
READ MORE <---You really should read more if you're still thinking this decision over.