December 3, 2012
Mortgage rates began the day in weaker territory, but were able to make it back to Friday's levels as most lenders improved pricing in the afternoon. Earlier weakness was primarily a result of the overnight sessions in Asia and Europe with several headlines accruing to the benefit of Stocks at the expense of bonds. Weaker bond markets tend to coincide with higher mortgage rates.
But the weakness in bond markets and in the Mortgage-Backed-Securities (MBS) that most directly influence mortgage rates, began to shift shortly after stock exchanges opened at 9:30am. Weaker-than-expected economic data at 10am continued to facilitate the bounce back for bond markets, ultimately resulting in lenders releasing positively revised rate sheets, more in line with Friday's offerings. Best-Execution for Conventional 30yr Fixed Loans remains at 3.375 with some scenarios viable at lower rates depending on the lender.
The rest of the week is characterized by uncertainty, both due to the events on the near-term calendar as well as the constantly looming issue of the Fiscal Cliff, which refers to a series of automatic spending cuts set to occur on January 2nd if political leaders can't agree on a plan to reduce the deficit before then. Fiscal Cliff headlines were big market movers at the beginning of last week, but markets gradually grew more an more dismissive as more political posturing was inferred.
Now, we're left with the constant task of assessing "how big a deal" any Fiscal Cliff headline might be, or if it will simply be chalked up to more political posturing. That must be balanced against the question of "how important is the economic data that remains?" There's a temptation to be utterly dismissive of the economic data because the Fiscal Cliff feels like an infinitely bigger issue, but today's reaction to weak economic data shows us that markets are still at least somewhat tuned-in. That means that Friday's big Employment Situation report remains a big potential market mover, even if some of it's traditional potency is lessened by the Fiscal Cliff.
(Read More:What is A Best-Execution Mortgage Rate?)
Loan Originator Perspectives
"Today's pricing a little weaker than Friday's, which is surprising given the declining ISM index and other data released this AM. We are seeing a number of investors reprice for better as the day wears on. All in all, it's all fiscal cliff, all the time for now. Friday's non farms payroll report will play a part, as will Wed's ADP version. Rates are pretty rangebound for now, so if you expect (as I do) that the fiscal cliff debate will go down to the wire, AND if you have an appetite/tolerance for risk, floating isn't the worst option in the world right now." -Ted Rood, Senior Originator, Wintrust Mortgage.
"Rates today are a little worse than Friday, but positive reprices are starting to roll in so we should be even on the day soon. As always I advise to lock your rate so that you don't have to stay glued to your computer watching rates everyday. I think we may see an ugly jobs report which would usually help rates. However, it's not a given that rates will improve." -Mike Owens, Partner With Horizon Financial, Inc.
"Rates were a bit worse than Friday this morning but have since improved to Friday's levels. There's again some clients betting that a fiscal impasse in the U.S. will lead to lower rates, but this is an extremely risky proposition with rates at record lows already. Most of the fiscal uncertainty is priced into MBS markets and rates, and any remote sign of compromise will send rates higher." -Julian Hebron, Branch Manager, RPM Mortgage
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).