November 15, 2013
Mortgage rates fell just slightly today, though this wasn't the case for every lender. Rate quotes are likely to be at the same note rate as yesterday's, but with slightly lower borrowing costs on average. This means that the most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution) remains on the stronger end of 4.375%, with 4.25% becoming increasingly viable.
In this context, "increasingly viable" can be thought of as follows. On any given day, one or two rates are going to make "more sense" than others in terms of payment and closing costs. For any given scenario, if you use a "no point / no origination" quote as your baseline, you would assess whether or not it made sense to move to a lower rate based on how much the closing costs increased.
Deciding what makes more sense is largely a factor of personal preference, but borrowers are generally more interested in moving to lower rates when it will take less than 5 years (roughly) to break even on the extra expense. This is the case with 4.375% and 4.25% at most lenders at the moment, and borrowers will increasingly be interested in moving down to 4.25% even if it increases closing costs slightly. To rephrase this definition of "increasingly viable," 4.25% has good bang for the buck once again--something it lost during the past week of interest rate volatility.
Loan Originator Perspectives
"I rarely am a fan of locking on Friday. With no high impacting data hitting Monday morning, I would advise to cautiously float over the weekend. I don't think we are going to gain much from here, so by floating you may not be rewarded with better pricing on Monday morning, so consumers closing in under 10 days should always consider locking. However, if you are 17 days out from closing, floating over the weekend would allow you to lock on a shorter term which gives you better pricing." -Victor Burek, Open Mortgage
"A sideways day is never a bad day, especially after a few good days in a row. I think it gives the market a breather, and lets things settle down, for possibly some more future gains. The economy isn't a cheery as last week's employment data made it seem, so there are improvements possibly still to be made. Of course, with all that said, if you are happy where you are at, it is never a bad idea to lock in the gains we've received the past few days, and call it a day. We've seen all to recently how fast things can be lost, and how long it takes to get them back!" -Jason York - VP of VA Operations, Prime Mortgage Lending
Today's Best-Execution Rates
- 30YR FIXED - 4.375% (4.25% increasingly viable)
- FHA/VA - 4.25%-3.75% (depends heavily on lender)
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- Uncertainty over the Fed's bond-buying plans and Fiscal Policy has been making for a tough interest rate environment where we're not seeing sustained improvement unless it's a correction to even bigger deterioration.
- The Fed's bond buying is the key consideration--not just the initial reduction (aka "tapering"), but the general pace of withdrawal. We've gone from tapering being a "sure thing" in September, to it being on hold until March 2014, and now December 2013 is increasingly possible after the most recent Employment report on Nov 8th.
- Markets continue to be most interested in economic data and its suggestions about the longer term trajectory of the economy. This will shape expectations for Fed policy in the coming months, and thus inform the direction of interest rates.
- The stronger the data the more likely the Fed is seen as reducing asset purchases. Rates would rise under this scenario, but the Fed indicated its cognizance of high rates creating headwinds for the recovery, and this suggests they'll attempt to keep the pace of rising rates moderate as long as inflation isn't adversely affected.
- (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario. There are many reasons a quoted rate may differ from 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).