January 10, 2013
Mortgage rates leveled off on Thursday, after moving gently lower on the first three days of the week. Bond markets such as US Treasuries began the day in weaker territory due primarily to overnight events in Europe and Asia. Though the road was slightly bumpy throughout the domestic hours, rates are at the same levels as this morning. MBS (the "mortgage-backed-securities" that most directly influence mortgage rates) were also a bit weaker in the morning, but not to the same extent as Treasuries. They also held a much less volatile trading range, allowing lenders to keep pricing unchanged at the same Best-Execution levels as yesterday--split between 3.375% and 3.5%.
(Read More:What is A Best-Execution Mortgage Rate?)
There are reasons to be both optimistic and concerned about the near term outlook for mortgage rates. Underlying markets failed to improve past recent levels that act as a sort of line in the sand between December and the higher rate environment of early January. But at the same time, rates also did a decent enough job of holding their ground in the face of today's weakness. The European equivalent to our 10yr Treasury moved high enough today to suggest a 1.97% US 10yr Treasury yield, yet we never even saw 1.91%.
That makes decent enough sense considering that Europe was the key market mover today. But there was also a bit of resolve on the part of domestic Treasuries not to keep slightly more pace with the global weakness. From a mortgage rates perspective, we've gained back a fair bit of last week's losses, and are somewhere in the middle of the risk/reward spectrum regarding locking vs floating. Previously, there'd been less reward than risk with last week's higher rates tipping the balance back in the favor of reward. The current week's improvements leave us in central, equivocal territory.
Loan Originator Perspectives
"Choppy market today, but good treasury bond auction improved mortgage bonds this PM. We're still in a sideways trading pattern, but don't take it for granted. When rates are near mutli-decade lows, procrastination is NOT the answer. The Consumer Finance Protection Bureau is also annoucing new mortgage standards today, and the more limitations placed on lenders, the more borrowers usually suffer (even if the stated intent is to protect borrowers!) " -Ted Rood, Senior Originator, Wintrust Mortgage.
"As I noted yesterday, rates had been hovering at record lows to end 2012, then rose .125% higher last week, and have been there since. An MBS selloff like we've had today would normally cause rates to rise further, but so far rates are holding. Rate shoppers should take these subtle upward rate moves (and corresponding MBS selloffs) seriously, because rates can creep up when bond market selling gains momentum. It's unlikely rates will spike sharply, but the upside risk far outweighs rates dropping in the immediate term. " -Julian Hebron, Branch Manager, RPM Mortgage.
Today's Best-Execution Rates
- 30YR FIXED - 3.375 - 3.5%
- 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 have risen moderately from their all-time lows, making for relatively increased reward for floating at the expense of greater risks of loss.
- Rates could easily move higher or lower, and unscheduled, unexpected events can ultimately have the most say in the direction.
- Near term risks in 2013 include the upcoming debt-ceiling debate in Washington as well as the Fed's policy outlook regarding securities purchases.
- (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).