November 28, 2012
Mortgage rates began the day near their lowest levels since early October as bond markets stayed in strong territory on leftover Fiscal Cliff concerns from yesterday's session. But a new round of highlights from Congressional leaders sent markets back in the other direction into the afternoon, essentially benefiting stocks and pushing interest rates higher in bond markets. MBS prices fell enough that several lenders released negatively revised rate sheets in the afternoon. MBS are the "mortgage-backed-securities" that most directly influence lenders' rate sheets and when their prices move lower, rates move higher.
Despite the overall weakness, not all lenders repriced today. Even with the reprices factored in, the average Best-Execution rate today is slightly LOWER than yesterday. At the most aggressively priced lenders, and for the right kind of scenario, we're starting to see some viability at 3.25% again, though 3.375% is still the predominant Best-Ex rate.
Given the fairly abrupt increase in volatility in underlying markets following the Greek bailout deal announced Monday, the fact that current rates are in line with their recent lows represents a logical opportunity. The volatility can be beneficial or detrimental for mortgage rates, but risk vs reward favors locking today.
(Read More:What is A Best-Execution Mortgage Rate?)
Loan Originator Perspectives
"The market has been reluctant to be more generous at these levels. With MBS at recent highs I think we are experiencing a bit of resistance. On the other hand the 10 year treasury yield rejected to trade into the 1.70's, and is currently moving back to its lows therefore I would cautiously float only if I am expecting to close in more than 15 days. If I am closing within the next 15 days I am locking 100%." -Constantine Floropoulos, Quontic Bank.
"I would definitely recommend locking all loans that are due to close and fund within the next 15 days. Any positive news out of Europe regarding Greece or DC regarding the Fiscal Cliff could push rates higher quickly, so longer term closings might want to consider locking in the gains we have enjoyed over the last couple days. " -Victor Burek, Benchmark Mortgage.
"I locked 4 deals today and will continue to lock unless told otherwise. There is not enough reward in floating and only the chance of disappointment if rates go up. Plus there are renegotiation policies to prevent runoff if rates really dive." -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).