January 15, 2013
Mortgage rates improved slightly on Tuesday, extending their recent streak of improvements to 7 days. Last Thursday was the only one in that series that didn't see clearcut improvements, but on average, lenders' rate offerings were roughly unchanged. So we'll count it! Today's gains were fairly tame with Best-Execution for Conventional 30yr Fixed loans remaining at 3.375% for most lenders and only slightly decreased borrowing costs.
(Read More:What is A Best-Execution Mortgage Rate?)
The calm movements in rates reflect a generally calm underlying market today. That's a somewhat interesting development considering the events on the calendar last night and this morning tend to connote more activity. In fact, markets were reasonably active, but that activity took place within fairly narrow trading ranges. The mortgage-backed-securities (MBS) that most directly influence rates, began the day stronger vs yesterday (stronger = lower rates). Though they gradually weakened into the afternoon, they never dipped into yesterday's levels.
These sorts of more equivocal trading days are a higher likelihood the closer we get to the onset of the Debt Ceiling debate. Some feel that the impending political drama will keep rates relatively more contained in the coming month. The recent rejection of another move higher last Thursday and Friday was a vote in favor of that containment, and unless we cross back above those rate levels from late last week, we'd continue to assume containment to be the case.
Does that leave room for rates to fall from here? In short, yes.. But note that we're roughly at the mid point between December's lows and the highs in early January. Further moves lower in rate will require REASONS vs merely existing out of respect for RANGES. In other words, after it became clear that rates were holding the line at their highest end of the range, the move back toward the middle is logical, but it doesn't guarantee a move down to the lower end. Because of this, locking is a more compelling short term choice than it's recently been.
Loan Originator Perspectives
"Lock what you can. We're seeing the best rates of the year. "-Mike Owens, Partner with Horizon Financial, Inc.
"Today is the first time rates have definitively regained the .125% that was lost as January kicked off. Since rates rose to start the year, we've been readying client files for the next dip and this is it. Locking today for clients who are ready to go (which means they've provided all their updated income and asset documentation and authorized a credit check). " -Julian Hebron, Branch Manager, RPM Mortgage.
"Little better pricing again this AM, although market has suffered some slippage as of 12:00 central. Best news is that every day we stay at same or better pricing helps define the new rate range. Nowhere near December's best pricing yet, but if you floated through recent increases and are now nearing closing, probably good to consider harvesting recent gains. It's all in your risk tolerance, and that's something to discuss with your LO to make sure you're all on the same page! " -Ted Rood, Senior Originator, Wintrust Mortgage.
"If you floated over the weekend, you should be enjoying nice gains in pricing. Anytime you pick up some gains, it could increase the chances of a pull back. That said, i would recommend locking any loan closing within the next 10 days. If you like risk though, continued floating could pay off as the debt ceiling debate might start to weigh on stocks which could allow money to flow into bonds." -Victor Burek, Open 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 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).