January 23, 2013
Mortgage rates were more unified in their improvements today after beginning the week rather equivocally on Tuesday. Most lenders offered improved interest rates or reduced costs (or increased lender credit) for the same rates available yesterday. Additionally, several large lenders offered bigger-than-average improvements, doing more to affect the average day-over-day change. In fact, 3.375% is edging back into the frame of reference as a Best-Execution rate for 30yr Fixed, Conventional loans, though 3.5% remains the most prevalent.
(Read More:What is A Best-Execution Mortgage Rate?)
Little happened in financial markets to motivate the move. Ironically, it was that very absence of information that actually facilitated the moderate improvements. While the House did in fact pass legislation to extend the Debt-Ceiling deadline to May 19th, markets didn't react much, having already "priced-in" the expectation. When bond markets and particularly MBS (the "mortgage-backed-securities" that most directly influence mortgage rates) hold steady, the absence of volatility decreases lenders' costs to protect against that volatility, thus helping rates move slightly lower.
Loan Originator Perspectives
"The recent movement in treasuries has indicated yet again that the market is looking for direction. Although most geopolitical and geoeconomic events seem to be under control, our experiences over the recent years tell us not to over/under react. The 10 YR US benchmark has settled into a narrow range within 1.81-1.89, and quite frankly that is good. The closer we get to 1.80 and below the more bullish we can be, however we must not be greedy, and consider locking as rates and spreads have improved." -Constantine Floropoulos, Quontic Bank
"Little more recovery for rates today as talk of debt extensions absorbs Washington. Every day we pick up ground takes us a little further from the higher rates of early January. IF you float, have a rate/pricing target in mind, and don't be greedy. Every day you stay at your current high rate is a day you lose money, whether you end up locking at 3.5%, 3.375%, or 3.25% on your new loan!" -Ted Rood, Senior Originator, Wintrust Mortgage.
"I'm a broken record, but locking is my recommendation to everyone closing in the next 30 days. Floating is just too risky and as we've seen the spikes come quickly where as the dips are miserably slow. Take the best pricing of the year and be happy." -Mike Owens, Partner with Horizon Financial, Inc.
Today's Best-Execution Rates
- 30YR FIXED - 3.5%, 3.375% creeping back
- 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.
- Prospects For Extending The Debt Ceiling Deadline currently seem to be preventing a move back down in rate. Passage of such legislation could further support a rising rate environment.
- (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).