Mortgage rates moved slightly lower today recovering a portion of weakness seen yesterday. Markets have a lot on their plate in the first two weeks of September, but the appetizer for those main courses is seen as tomorrow morning's Bernanke speech from Jackson Hole. There's no major anticipation that he will necessarily divulge any new and different information, but the speech has a certain amount of potential energy.
This could be good or bad for rates tomorrow, and has likely played some part in the back and forth we've seen so far this week. Despite the volatility, the Best-Execution level of 3.5% for 30yr Fixed Conventional Loans, has remained constant this week, though the costs associated with whatever rate you were quoted Monday may have changed several times this week.
(Read More:What is A Best-Execution Mortgage Rate?)
Although there is fair potential for volatility tomorrow, it's nothing compared to what could be coming in the next two weeks. The line up of events is the most concentrated collection of potential market movers we've seen in months. There's not a major risk that Bernanke will say something tomorrow that will destroy the possibility of low rates forever. The risk is that rates happen to be higher tomorrow, and that you hold out too long waiting for them to bounce back only to run the risk of the bigger-ticket events of September working against you. We can't know if that's more than a 50/50 chance, but we do know rates are very near all-time lows and there are potentially volatile events ahead.
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
Julian Hebron, Branch Manager, Loan Agent, RPM Mortgage
The rate lock advisory I've had since Monday has served clients well. Rates were higher from July 24 through August 17. During that time, I'd been saying to clients that the next dip would be their opportunity to hit their rate lock targets, but they'd need to act within one or two days. This scenario has played out this week: Monday and Tuesday were great lock days. Yesterday rates went up a bit so we floated, and now rates are back down today. So we’re back to locking today to capture lows ahead of Bernanke's policy speech tomorrow. The upside risk is too great, and the chances of rates dropping significantly from current lows are less likely. This lock-on-the-dips approach will likely be the theme until year-end: rates will hit lows at miscellaneous intervals each trading day then rise on short bits of U.S. and non U.S. economic optimism. Clients need to set rate targets with their lenders that they can't or won't go above, and they need to give their lenders standing order to lock those rates when MBS markets allow.
Victor Burek, Benchmark Mortgage
Many big hitting events coming our way in September which makes floating very dangerous, or very rewarding. If i were buying a home, i would be locking today. If i was refinancing, i would float if my current rate was in the 4's, but would lock if my current rate was over 5%. If in the 4's, if rates rose, you still have a awesome rate which can allow you to be more or a risk taker.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.5%
- 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).