January 31, 2013
Mortgage rates were very slightly lower in most cases, making for marginal improvements in borrowing costs within the confines of recently higher interest rates. In other words, today's quoted rate is likely the same as yesterday's, depending on the scenario, with a token reduction in closing costs (or increase in lender credit). In many cases, there was no improvement to costs, and a few lenders were slightly higher in cost. 30yr Fixed, Best-Execution remains at 3.625%, though lower rates are still available.
(What is A Best-Execution Mortgage Rate?)
Treasury and MBS trading was EXTREMELY quiet today as if to suggest a certain calmness before a potential storm (MBS are the mortgage-backed-securities that most directly influence mortgage rates, and they tend to trade in the same direction as Treasuries). The storm in question is the mighty Employment Situation Report that will be released at 8:30am tomorrow morning. This is the single most important piece of scheduled economic data each month and tomorrow's has the potential to be hugely important in light of the abrupt changes we've been experiencing in interest rates. If it shows much better-than-expected job creation, rates could be significantly higher tomorrow. Conversely, a downbeat report would likely have a substantially positive effect on rates, and also stands the chance to get the recent trend moving back in the other direction. That sounds enticing, but risks of floating continue to outweigh rewards for now.
Loan Originator Perspectives
"Few if any lender reprices today, a refreshing change of pace from recent days. Tomorrow's NFP report has the potential to move rates, but it would take a remarkably poor number of new jobs created to move MBS much. Seeing a lot of momentum selling now, and when that snowball starts rolling, it's tough to stop." -Ted Rood, Senior Originator, Wintrust Mortgage.
"Floating through tomorrow's data is highly risky, so float at your own risk. My personal view is we would have to see a number greater than 225k for it to hurt mortgage rates. Anything under we either hold here or rally. My belief is we see a lower number. " -Victor Burek, Open Mortgage.
"We're taking the rate improvement between yesterday's mid-day Fed announcement and today as an opportunity to lock clients at the best levels since this MBS selloff picked up steam a week ago (rates rise in a selloff and drop in a rally). MBS technicals are still too foreboding and upside rate risks outweigh benefits of "holding for better" ... especially for clients on short time horizons, like those in contract to buy homes that need to close in the next 20-30 days. " -Julian Hebron, Branch Manager, RPM Mortgage.
Today's Best-Execution Rates
- 30YR FIXED - 3.625%
- FHA/VA - 3.25% - 3.5% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.875%- 3.00%
- 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).