Yesterday marked the first day in 2012 where Mortgage Rates increased by any sort of statistically significant amount.  Even so, it was only significant in the context of the recent extreme flatness at all-time lows.  Today's action was right back to "insignificant," at least as far as averages are concerned.  Factoring out one notable lender whose costs rose a bit more than the rest and the averages would be slightly improved today.  More important than any of this nitpicking is that the day-over-day movements in mortgage rates have been anything but extreme.  Indeed, the 3.875% Best-Execution rate remains intact, and as has been the case for weeks, the day to day changes that we measure have been to the borrowing/closing costs associated with obtaining prevailing rates.  

Bond markets generally improved today but Treasuries more so than MBS (the "mortgage backed securities" that most directly affect mortgage rates), the ongoing effects of the tax cut extension are having an impact on the averages that we collate each day, as some lenders have had rather precipitous increases to fees well beyond what would be justified simply by movements in MBS. Beyond that, the positivity was more focused on Treasuries due to global demand for the safest-haven securities, a fact which was demonstrated after 10yr Treasuries posted strong results in today's auction even after having improved in the hours leading up to it.  MBS were somewhat along for the ride, but neither MBS or mortgage rates themselves always move in proportion with Treasuries, something we discussed in great detail several months ago (read more...)

Yesterday we said that volume stood a good chance of increasing today and that a strong 10yr auction could benefit MBS.  This was indeed the case as several lenders offered price improvements in the afternoon.  Tomorrow is a bit different in the sense that there is economic data being released in the morning and although European headlines continue to play a vital role in trading levels of the securities that ultimately end  up affecting your mortgage rates, there has been a slightly increased amount of attention being paid to our economic reports at home.  Additionally, tomorrow is the last of this week's major Treasury auctions.  The combination of these two factors in addition to the omnipresent threat of Euro-headlines introduces a slightly higher amount of risk today versus yesterday.  


  • 30YR FIXED -  3.875%, glimpses of 3.75% diminishing due to tax-cut-extension
  • 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.