November 15, 2012
Mortgage rates put an end to two days of weakness, but for most lenders, rates were only moderately improved on Thursday. Weak economic data helped push interest rates and stock prices lower on Wall Street today, but Treasuries and Mortgages started the session in worse shape than yesterday. Consequently, the improving market conditions in the Secondary Mortgage Market only resulted in minor improvements on the COST side of the Best-Execution equation, whereas Best-Ex rates themselves remained unchanged at 3.375%. Lower or higher rates can be viable depending on the lender and scenario.
The past two days of rising rates were somewhat of a concern, especially as mortgages disconnected from their generally well-correlated relationship with Treasuries. As we noted yesterday, it's important to remember that mortgage rates ARE NOT determined by US Treasury yields, something we've discussed in greater detail in the past. Just like rates themselves can gather momentum in either direction, so too can this relationship between mortgage rates and broader bond markets. If momentum is working against us on both fronts, things can get fairly ugly fairly quickly and today goes a long way toward easing some of those concerns.
Loan Originator Perspectives
"Stocks soft again today as the fiscal cliff and political pontificating continue. Mortgage pricing is better, but I am floating short term as no easy solutions for US fiscal woes are apparent. If you float, make sure you have a defined pricing goal in mind so your originator knows when to pull the trigger. " -Ted Rood, Senior Originator, Bank Star.
"No reason to float. Treasury yields are at their lows, and although MBS have been resisting to move higher, truth is they haven't resisted to move lower. Higher rates are more likely in coming weeks barring a major economic or geopolitical event. When I say higher rates I don't mean drastic, just looking at the trend and the current range and accepting that we are at the bottom end of that range. Unless there is something new to add additional buying of treasuries and mortgage backed securities my opinion is to lock as the risk overwhelms the reward." -Constantine FLoropoulos, Quontic Bank
"Locking is not a bad thing to do. I encourage it and advise it. " -Mike Owens, Partner with Horizon Financial, Inc..
Today's Best-Execution Rates
- 30YR FIXED -3.375%
- FHA/VA - 3.25% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.875% - 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).3
(Read More:What is A Best-Execution Mortgage Rate?)