After improving for the first time in a week yesterday, Mortgage rates moved slightly lower again on Friday. That said, late day market weakness may lead some lenders to recall initial rates sheets and raise rates/fees modestly. Even then, rates would still be at their best levels of the week with more lenders today joining the ranks of those already back down to a 3.25% Best-Execution for 30yr Fixed Conventional loans.
All things considered, it was a positive week for mortgage rates. From start to finish, rates underwent the process of stemming losses that carried through the 3-day weekend and reversed those losses by Thursday, ultimately heading into Friday evening at the week's best levels.
The week ahead is busier in terms of economic data with an important report on Retail Sales leading off first thing Monday morning. It's not impossible for rates to improve further, but it has been slower going moving down FROM 3.25% as opposed down TO 3.25%. In fact, we arrived at 3.25% rather abruptly, and the structure of the secondary mortgage market securities allowed for that quite well, but that same structure makes things more difficult at 3.125% and below. Again, this isn't to say that we think rates will necessarily go higher, but simply that IF they go lower, it's not likely to happen quickly compared to other moves lower in rate.
Long Term Guidance: While the recently high degree of uncertainty remains very much intact, the Fed's decision to specifically target Mortgage-Backed-Securities in a third round of Quantitative easing provides a supportive undertone for mortgage rates. We'd still advocate not trying to get too far ahead markets. In other words, we wouldn't try to guess how low or how high rates might go before changing course. Rates remain near all time lows and risks of volatility remain high. Those factors suggest that you stay vigilant regarding the day-to-day swings in mortgage rates. If you're floating, set a limit as to how high rates would have to go before you cut your losses and locked. Similarly, set a target of how low rates would have to get before you lock.
Loan Originator Perspectives
"Rates were better this morning and have just recently (as of 11:25 am PT) gotten worse as mortgage bond (MBS) selloff has gained steam in the last half hour. With this morning's rate improvements on top of yesterday, we were able to lock some clients who had established target rates and were therefore ready to go. Now, unless we get a sharp reversal into positive territory, we'll hold on locking anyone else until Monday. This is a good reminder to clients that rates move in real time throughout each MBS trading day. When it's volatile like this, clients need to have target rates that they can't or won't go above, and give lenders standing orders to lock those rates when they become available. " -Julian Hebron, Branch Manager, Loan Agent, RPM Mortgage
"To be honest, my personal opinion says rates to go higher. Maybe a "late year" stock market rally as well as election results. Things "need" to look like all is good in the markets. As a result, I think rates go slightly higher. I doubt we see sub 3.25% rates....but you never know! Regardless, rates are incredibly low. Worst case is you do a "no cost loan" now...and rates fall....and you do it again! Good luck...." -Tim Elkins, CEO, Crossline Capital.
Today's Best-Execution Rates
- 30YR FIXED - 3.25% - 3.375%
- FHA/VA - 3.25% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.75%
- 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
- This 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).