Mortgage Rates finally caught a break today as rates held steady to marginally improved after rising rapidly earlier in the week. While this doesn't equate to rates that much lower than yesterday's, it's at least a pause in the pain. Whether or not the pain subsides from here or returns with a vengeance on Monday remains to be seen.
For now, it is more salient in the short term. To clarify, the recent rise in rates is most noticeable if you're examining a fairly narrow time frame. In that case, you'd see Best-Execution rising from 3.375% on 7/23/12 to 3.625% today.
(Read More:What is A Best-Execution Mortgage Rate?)
But over a longer time frame, any Best-Ex rate under 3.75% has been in the range of the lowest all time lows. The longest-running stretch of all-time low rates occurred when we hit the wall on the way down at 3.875%. This was only definitively broken as recently as several months ago.
If you missed the mid-to-late July rate offerings, you may be wondering if rates will get back down to those levels and how long it would take. The fact is that even if there was a consensus among the smartest minds in the mortgage market that spoke to that question, it still couldn't account for the variables that are likely to determine the answer.
Above all, it comes down to Europe. Europe has been the driving force in keeping broader interest rate markets depressed for roughly a year now. At some point that trend toward lower and lower rates will turn, but no one knows when. The longer the trend continues and the more hype builds over events that could catalyze that turnaround, the more volatility we will see in rates. Though not the only factor, the past few weeks have had much to do with markets trying to get ahead of what they think might be "the turn."
This has happened before and might happen again. Each time in the past, the "hype" has proven fruitless, but we'd note that even after many wolf-cries prove to be false alarms, the last one is real. So the new game in town is betting on whether or not the most recent wolf-cry is the real deal. Anticipation and anxiety seem to be growing in recent weeks, but it will be up to the events in the early part of September to pile-on to the recent painful trend, or to prove once again that there is no wolf.
To reiterate, there's no way to be certain that rates won't continue to rise. The past year of ever-lower rates and ever-gloomier news has groomed many market minds to expect every suggestion of a bottom to be merely hype. That's been a fantastic strategy for them for pretty much that whole 12 months. When the bottom finally occurs, they're likely to stand on a sinking ship, at least longer than someone with a truly neutral point of view might. That's the reason for our updated long term guidance below.
Long Term Guidance: We'd continue to advocate against trying to "get ahead" of current market movements due to the high degree of uncertainty. The long-term direction of rates has been down, down, down, for the past year. At some point, this will turn, and when it does, we highly recommend that you're prepared by drawing your OWN line in the sand as to how much rates would have to rise before you lock at a lost. That's assuming you don't simply lock as soon as you're able. For those with lower levels of risk tolerance who would consider movements in cost (despite unchanged interest rates) to be significant, or for those within 15 days of closing, or who are purchasing, this certainly favors locking. We'd also consider that rates remain very close to all-time lows and uncertainty to all-time highs. This also favors locking.
Loan Originator Perspectives
Ted Rood, Senior Loan Officer, Bank Star
Hoping the rise in rates is abating for the moment, but potential for further increases is still very real. I'm advising clients who want to float that we have likely seen rate lows for some time. If your loan makes sense with today's pricing, don't despair over where rates were 2 weeks ago, get going before we lose more ground!
Julian Hebron, Branch Manager, Loan Agent, RPM Mortgage
Lots of technical damage since last week still leaves MBS with room to fall, which would push rates higher still. That said, most refinance candidates who were holding for lower (up until this week's rate spike) are still willing to hold for some medium term correction. And the Eurozone's problems are enough of a case to let them continue holding medium-term to see if more shock out of that region drives investors back into the MBS safe haven, which would help rates improve a bit. At least this week is a wake up call for those folks so they may be more inclined to lock on the next dip instead of waiting perpetually. As for purchase clients, we're locking as they get into contract given the short-term risks.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.625%
- FHA/VA - 3.5% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.875-3.00%
- 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
- 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).