December 28, 2012
Mortgage rates continued a moderate trend of improvement from mid-week, bringing rates to their best levels of the week on Friday. All of the recent day-over-day changes in rates have taken place on quite a small scale historically as broader markets stay exceptionally contained ahead of the Fiscal Cliff deadline. Conventional 30yr Fixed Best-Execution rates are still widely viable at 3.375%, but 3 days of minor improvements brings 3.25% increasingly back into view.
(Read More:What is A Best-Execution Mortgage Rate?)
Despite the positive tone to end the week, markets and mortgage rates are still at risk for additional volatility related to the Fiscal Cliff. The House of Representatives will reconvene on Sunday Evening--something that likely wouldn't be happening unless they're trying to pass at least some sort of stop-gap form of legislation.
The way markets respond to Sunday and Monday's political news will depend largely on the details of the news, but also on the simple fact that SOMETHING either will or won't have been accomplished by the end of 2012. At the risk of stating the obvious, if Washington accomplishes ANYTHING (even if it's small, short-term, and innocuous), it's still better than NOTHING.
All things being equal, any passage of legislation stands the risk of putting pressure on bond markets and mortgage rates. The extent of the pressure is where the details are important. It's very much a guessing game as to where rates will lead off next week, next month, and next year (all happening on Tuesday!). Because of that, it continues to be the case that there's more risk than reward to floating in the short term.
Loan Originator Perspectives
"I still favor floating til January. Markets waiting for a fiscal cliff solution but seems to me all solutions should help rates hold steady to improve. Regardless, we are going to have higher taxes and less spending..neither good for a struggling economy. Dont forget, the Fed is so concerned about our economy, they announced basically unlimited monetary easing at their last meeting. On a side note, early reports show Christmas spending to be disappointing which also favors low rates." -Victor Burek, Open Mortgage.
"With the uncertainty of a Fiscal Cliff deal, and this being a long holiday weekend, I would not risk floating your interest rate if you are closing soon. However, if the Cliff is not resolved, we may see an opportunity to lock in at low's not seen for a while." -Brett Boyke, Senior Mortgage Banker, Wintrust.
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, but uncertainty surrounding the Fiscal Cliff is applying upward pressure.
- 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).