Mortgage Rates were noticeably lower today at some lenders and only slightly lower at others. The net effect is an average Best-Execution rate that comes to rest once again precisely on June 1st's all-time lows. Best-Execution rates on 30yr Fixed Conventional Loans have been in a range between 3.625% and 3.75%, but are naturally closer to 3.625% after today's improvement, and are certainly
(Read More:What is A Best-Execution Mortgage Rate?)
There are two key points we'd like to emphasize today:
1. Although the events occurring this weekend have tremendous potential to move markets in one direction or the other, there's other resistance to lower rates despite pure market levels. It continues to be slower-going moving down in rate vs up. One sidenote here is that the reaction could be muted, refuted, or exacerbated by Wednesday's FOMC Announcement. If the weekend caused rates to rise on Monday morning, and for some reason you held off until Wednesday only to find rates continuing to rise after the Fed, you could be looking at significantly higher rates. Of course rates could move lower as well, and if the opposite scenario played out, at the very best, rates Best-Execution could fall to 3.375%. Contrast that to the worst-case scenario which would be Best-Ex rising back above 4%. These are extremes, and not likely to happen.
2. Rates today are at all time lows
The implied message here is "why risk it?" We can answer that positively or negatively, but ultimately it's your call. Floating for lower rates at this point only really makes sense as a LONG term commitment to the destruction of the Euro-zone and the inability of the domestic economy to fully recover without Fed intervention, AND for both of those things to continue happening simultaneously.
Here's something we said on Wednesday that bears repeating:
Though there are many more bits and pieces creating risk and uncertainty in the coming days, these "biggies" are more than enough to cause the volatility that we're seeing in markets over the past two days. Big moves are at stake and although there's no mathematical or logical reason to believe markets will move one way vs the other, the SIZE of the risks make floating very dangerous in this environment. Again, it's not that floating wouldn't pay off here, or couldn't, but particularly with respect to floating over the weekend, we could just as easily wake up to 4.0%+ Best-Execution rates on Monday as we could 3.5%, not to mention that things could go right back in the other direction after the FOMC Announcement!
Long Term Guidance: We'd continue to advocate not trying to "get ahead" of current market movements as a high degree of uncertainty is pervasive. While it's a reasonably safe assumption that European concerns will generally help rates stay lower than they otherwise would be, that "otherwise would be" part is very much a moving target. Best bet is to focus on the fact that rates are at their all time lows, and can change quickly based on events that aren't "scheduled" or able to be forecast. Risk vs reward for floating vs locking looks a bit larger than we'd like, but not out of the question for those who understand the risks and have an exit strategy if things don't go their way.
Loan Originator Perspectives
Ira Selwin, Vice President of Secondary Marketing
My thoughts again would be to lock your loan if you can. The risk of the unknown is far too great to take a chance, with Greek news this coming weekend, and the FOMC next week.
Jason York, Vice President of VA Operations at Prime Mortgage Lending, Inc
We'll keep it short and sweet on this wonderful Friday. No one will hate you if you lock in your rate today!
Jeff Statz, Mortgage Advisor, Network Funding, L.P.
I am extremely pleased with the vigilance of MBS this week. Locking at all-time lows, thanks to MND's advice, is a huge benefit. Remember, if you're looking at interest rates in anticipation of locking, be sure your lender is also ready to Lock your deal. Anyone that doesn't yet have an application in with their lender needs to do so. You can have the loan process a bit and Float the loan, but there needs to be that application, so you have a Locking opportunity.
Mike Owens, Partner with Horizon Financial, Inc.
Lock your rate and be happy with a rate you can brag to your neighbor about. Go with a shorter term too. Save thousands in interest and look at it as an investment in your retirement.
Ted Rood, Senior Mortgage Consultant, Wintrust Mortgage
Rates today should be awesome, but many lenders are pricing FHA streams poorly as they contemplate dropping the program. It's increasingly looking like mortgage pricing may soon suffer as they flee risk and pipelines fill.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.625%
- FHA/VA -3.5% - 3.75%
- 15 YEAR FIXED - 3.00%
- 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
- Rates could easily move higher or lower, but given the nearness to all time lows, there's generally 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.
- (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario. There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).