Mortgage Rates are simply on a tear...  New records were set yesterday and again today--granted, by only small margins each time and only with respect to borrowing costs.  The actual interest rates that constitute the best combination of monthly payment and fees for the best-qualified borrowers planning on keeping their home/mortgage an average amount of time have not changed.  But if it weren't for the widespread phenomenon of lenders pricing in the effects of the tax cut extension, rates would be even lower.

Today's strength in mortgage rates and even broader bond markets was somewhat of a paradox as it followed a better-than-expected Employment Situation Report.  This is generally regarded as the most important piece of scheduled economic data each month in the US.  When it is released with better-than-expected results, it's generally seen as a positive economic indication thus benefiting stock markets and raising interest rates. 

Although today's report printed with a headline of 200k jobs created (versus expectations of 150k), internal components of the report showed that jobs that have traditionally been temporary likely accounted for most of the "beat."  Stocks sank a bit after that and Treasuries rallied to yesterday's best levels.  The Mortgage-Backed-Securities (MBS) which most directly govern interest rates moved well past their best levels yesterday, allowing for the marginal improvements in lender offerings.

Beyond the internal components of the Jobs report, the lingering gorilla in the room otherwise known as the European Debt Crisis likely contributed to the ongoing good demand for US Debt (which indirectly helps mortgage rates).  With the Jobs report out of the way and most lenders having priced in tax-cut extension fees, we're right back to European headlines being the chief concern.  There's also a round of Treasury auctions next week that could coincide with some pressure on interest rates.  But ultimately, there's no way to know what will happen next in this market.  All we know is that rates are at all time lows.  Yesterday wasn't a bad day to lock and neither is today.


  • 30YR FIXED -  3.875%, glimpses of 3.75% at the top few lenders.
  • FHA/VA -3.75%
  • 15 YEAR FIXED -  3.375%
  • 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
  • Current levels have experienced increasing resistance in improving much from here
  • There are technical reasons for that as well as fundamental reasons
  • Lenders tend to get busier when rates are in this "high 3's" level and can throttle their inbound volume by raising rates or costs.
  • While we don't necessarily think rates are destined to go higher, given the above facts, there seems to be more risk than reward regarding floating
  • But that 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.