Mortgage Rates recovered from what was shaping up to be an ugly morning to fall more in line with lender offerings seen last week.  The secondary market that underlies and drives mortgage rates underwent a fairly violent shift this morning relative to it's recently more peaceful trading.  So it's only after most lenders released new rate sheets this afternoon that rates are returning to last week's levels.  That process of unwinding the volatility has, however, left lender's rate offerings more stratified, with wider gaps between the best and worst priced lenders. 


  • 30YR FIXED -   4.0%, Some 4.125%, Very few 3.875%'s
  • FHA/VA - 3.75%, more balanced with 3.875% today
  • 15 YEAR FIXED -  3.375%-3.5%
  • 5 YEAR ARMS -  low 3% range, huge variations from lender to lender.

Guidance: (Nothing has changed about our recent guidance because frankly, nothing much has changed about rates being firmly planted around an average 4.0% Best-Execution.  We'll have to see how the rest of the week goes in terms of European headlines versus domestic economic data, but the position is easy enough right now: not much incentive to float unless the mortgage-backed-securities trading in the secondary market start showing some activity in the next lower coupon (see the reference to 3.5 coupons--currently the lowest--in the chart at the bottom of the page).

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: