Much like yesterday, Mortgage-Backed-Securities (MBS), began the day in weaker territory and rallied in the latter part of the day.  Improving MBS are usually good for Mortgage Rates and today is no exception.  But the benefits to rates were only enough to get things back to similar territory as yesterday.  No major day-over-day improvements.  Some lenders are slightly better, some are slightly worse, but on average, the Best-Execution Rates are unchanged.  

Also similar to yesterday is the phenomenon where Treasury yields rose while mortgage rates held steady.  This is more of an "FYI" than anything, or perhaps a reminder that it can happen, and just did.  Yesterday we said that the increased availability of 3.875% had us feel even more like locking, and the fact that 4.0% Best-Execution continues to prevail just keeps reiterating that sentiment.  On the secondary market, MBS have been so insanely focused on a narrow band of prices that it really won't make any sense to bet on the market moving until we're firmly out of that band of prices (the prices in question equate to the 4.0% Best-Execution level by the time one extrapolates MBS prices to lender rate sheet offerings). 

That would seem to suggest that you could float just as easily as you could lock and face minimal risks.  While that's partly true, the main point about all the ongoing guidance below is that EVEN IF rates improve from a 4.0% best-execution level, they wouldn't be going any lower than 3.75% any time soon, and even that would be a fairly fleeting event.


  • 30YR FIXED -  4.0%, increasing amount of 3.875's.
  • FHA/VA - 3.75%, fewer 3.875's
  • 15 YEAR FIXED -  3.375%-3.5%
  • 5 YEAR ARMS -  low 3% range, huge variations from lender to lender.


In a fundamental sense, we're well aware of the fact that European drama continues to help domestic bond markets.  Technically, we're impressed that mortgage rates have been this flat for this long.  The "batting cage" metaphor or the chart below it if you prefer, continue to be the best guidance we can offer in this uncertain environment.  With the ongoing sideways movement of Best-Execution around 4%, the chances increase that the next move will carry a bit of momentum with it (as if the current calm is akin to "storing energy").  If it goes in a mortgage rate-friendly direction, there's limited benefit (an eighth to a quarter of a point of improvement) versus the damage that could result from it going the other way.  Fortunately, neither of those eventualities appear to be happening at the moment, so it's hard to go wrong.  We'll let you know the day that changes.

Batting Cage Metaphor:

(this can be applied to any endeavor where you're trying to "go out on a high note").   Rate offerings from lenders over the past month have been like a temperamental pitching machine in a batting cage-generally getting the ball across the plate, but with no really juicy pitches.  But recently, we've seen some more consistently good pitches (best-ex around 4.0% instead of 4.25%).  Sure... you've seen better, but not by much (3.875% and RARELY 3.75%).  How many more will you count on before calling it a day?  Personally, I'd like to end my batting cage session with a nice hit.  The more "pitches" you wait for with rates already at a 4.0%, the greater the risk that the next pitch will be a curve-ball.  To drop the metaphor, although rates this low CAN go slightly lower, the improvements are fairly minimal compared to how much higher they could go.  Still, if you're not in any particular need to refinance and are operating on a longer-term perspective, we continue to feel good about that "wall" at a 4.25% best-execution level as a good stop-loss point for inclined floaters.  Ask us to explain more about that if it doesn't make sense. 

Another way of looking at the lock/float spectrum based on the lowest MBS coupon actively trading and being produced in the secondary mortgage market: