Mortgage Rates were unchanged to slightly higher today, but several lenders released improved rate sheets in the afternoon bringing them closer in line with yesterday's offerings. Rates continue to operate in a fairly narrow range resting on all-time lows. Best-Execution rates on 30yr Fixed Conventional Loans have been in a range between 3.625% and 3.75% with the latter being slightly more prevalent over the past 2 days.
(Read More:What is A Best-Execution Mortgage Rate?)
Rate sheets belied market movement today as US Treasuries and even the more-relevant Mortgage-Backed-Securities (MBS), which we often describe as having the most direct influence on lenders rates, improved noticeably. As is often the case when bond markets are rallying, Treasuries outpaced MBS. But a bit less common is the fact that lenders' rate sheets haven't kept pace with improvements in MBS to their normal extent.
This can occur for several reasons, including capacity constraints at lenders (rates have been low, and there's little incentive to push them lower if business is already booming), market volatility, and funding constraints around settlement time. The reasons aren't as important as the message, which is to not expect to see rates have improved as much as Treasuries.
On the topic of volatility, markets are nervous about an unprecedented concentration of market-defining events taking place over the next 7 days. These include the Greek elections on Sunday, an EU Summit over the weekend, the FOMC policy announcement next week and the 30yr Bond Auction tomorrow afternoon (today's 10yr auction went well, and is one of the contributing factors to Treasuries' outperformance of mortgage rates).
Here's something we said yesterday that bears repeating at least through Friday:
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
Ted Rood, Senior Mortgage Consultant, Wintrust Mortgage
FHA's reduced cost streamline program officially began Monday. Numerous lenders have already stopped accepting applications for it, especially for loans they don't currently service. First time I can remember when lenders rushed AWAY from new loans, certainly not good for borrowers. Rates are great, biggest issue these days is finding lenders who want you, especially if you're not going through your current servicer. Risk aversion is the word of the day!
Jason York, Vice President of VA Operations at Prime Mortgage Lending, Inc
If my customers are content where they are, the safe bet right now is to lock if you are within 30 days. A lot of info is coming up soon, so I would rather miss out on a little bit, then to not lock and wind up on the wrong side of a big reprice for the worse.
Victor Burek, Benchmark Mortgage
Lender rate sheets were relatively unchanged today. A strong auction of 10 year notes has help mbs prices move higher which lets lenders pass along better pricing. We are already seeing a few lenders reprice better today. Rates continue to be fantastic, but i favor floating over night. Economic data continues to get worse and Europe is not getting better, both of which indicate to be the best rates are ahead of us.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.75%
- FHA/VA -3.75%
- 15 YEAR FIXED - 3.125 edging down to 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).