November 6, 2012
Mortgage rates began the day only moderately worse than yesterday's latest offerings, but rose sharply throughout the day. In the late morning and early afternoon, bond market conditions deteriorated rapidly, resulting in most lenders recalling rate sheets to revise rates and fees higher at least once. Several lenders recalled rate sheets twice as markets trading in the secondary mortgage market continued to struggle.
At first glance, it's fair to assume that the volatility is related to today being election day, though we'd hesitate to specifically assign market movements to potential changes in sentiment. In other words, we've previously suggested that a Romney victory would likely coincide with higher rates, but wouldn't go so far as to say "rates moved higher today because a Romney victory seemed more likely." This could end up being nothing more than volatility and "herd mentality" before a major event.
Does the apparent closeness of the presidential race play into this volatility? Probably to some extent. More likely, we're seeing bond markets move into a defensive stance to account for multiple outcomes. There's also the need to account for Treasury auctions coming up in the next two days and lingering election uncertainty could make these more challenging. Even though MBS ("Mortgage-Backed-Securities") most directly affect mortgage rates, they tend to move in the same direction as Treasuries, simply in varying magnitudes.
If we have a clear election result tomorrow, pontificating on mortgage rate volatility due to the election will be a much easier endeavor. For today though, the defensive mentality is in control. The silver lining to today's weakness is that it's seen mostly in the form of higher COSTS for the same rates quoted yesterday as opposed to the RATE itself moving higher. In other words, 3.375% Best-Execution remains intact, while the closing costs for that rate are much higher.
(Read More:What is A Best-Execution Mortgage Rate?).
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).