February 11, 2013
Mortgage rates backed down from recent highs to begin the week, with moderate improvements to the costs associated with prevailing rates. This means that the movement between Friday and today isn't enough to change the actual interest rates you're likely to be quoted, but in most cases, lenders are either charging less for that rate or are able to cover additional closing costs. Best-Execution for 30yr Fixed, Conventional Loans remains at 3.625%. Costs were close to their recent highs on Friday and today are closer to mid-week levels. Some lenders released positive reprices in the afternoon as mortgage-backed-securities (MBS) improved.
(What is A Best-Execution Mortgage Rate?)
The gradual improvement in bond markets (includes MBS) was set against the backdrop of an extremely quiet trading day. This began when global markets would have normally opened in Asia, but most Asian markets were closed due to holidays in Japan and China. Combine that with the rough weather on the East Coast in the US and the completely empty calendar of economic data and the slowness is well-accounted-for. It could have gone either way for bond markets, and in fact, it did. Treasuries are slightly weaker vs Friday and MBS (the "mortgage-backed-securities" that most directly influence mortgage rates) are slightly stronger. Data remains light for the rest of the week, though Wednesday brings the important Retail Sales report as well as the 10yr Treasury Auction, both of which may affect mortgage rates.
Loan Originator Perspectives
"Although the climate suggests to be ultra conservative, we are cautiously considering the recent consolidation as a net positive for interest rates if the stock market stalls at these levels. Overall, the risk for higher rates is extremely high.....but we see the potential for some small windows of risk trading potentially in our benefit. I would cautiously float at these levels." -Constantine Floropoulos, Quontic Bank.
"All's quiet in the world of mortgage rates today, and that's probably not a bad thing. The sequester and Europe still loom large, and until they are resolved, we're likely range bound on rates. The 10 year bond has broken resistance, currently dropping past 1.95%, and that is a trend we'd like to see continue with MBS. Bottom line: if you've floated this long and aren't scheduling the closing yet, may want to give it a few more days and see if we gain some more ground." -Ted Rood, Senior Originator, Wintrust Mortgage.
"The equity and bond markets are relatively quiet today. It feels to me that we are waiting for a shoe to drop here. That makes me nervous, as we could go either way. I would lock up any short term closings if you are floating right now. There is no sense in trying to push your luck until we get a more clearly defined direction." -Brett Boyke, Senior Mortgage Banker, Wintrust 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).