February 26, 2013
Mortgage rates moved lower today, extending their rally following yesterday's Italian election news. The situation in Italy continued to represent an unknown when trading got underway in the US and combined with Fed Chairman Bernanke offering no surprises, rates markets held their ground despite stronger economic data. This brings most lenders to their best rate/fee combinations since February 7th while others are now at their best levels in just over a month. In most cases, the Best-Execution rate remains at 3.625%, but 3.5% is as close as it has been in several weeks, and most lenders can offer reasonable trade-offs to move lower in rate (higher costs or decreased lender credit).
(What is A Best-Execution Mortgage Rate?)
The key takeaway from today's market activity is that Europe-driven panic and/or uncertainty continue to be one of the two key drivers of interest rates in the US (the other being Fed policy). It's worth noting that markets may well have been that much more contained this morning given the potential anticipation for today's first of two semi-annual Congressional appearances from Bernanke. But without some serious uncertainty about Europe (thanks to the Italian elections), this historically wouldn't have been enough to prevent interest rates from rising more seriously after a morning of unanimously better-than-expected economic data.
This is a mixed blessing in that European turmoil is once again good for rates today, but also suggests that at least part of the reason for those lower rates is dependent on some something that's inherently unpredictible. It seems relatively safe to think that there will be no major governmental solution for Italy in the next few days and thus the time between now and the end of the week stands a better chance than it recently has to be supportive. That said, the current case for recently lower rates is founded, in large part, on factors that aren't as easy to predict and plan for. In general, we're still playing defense against a rising rate environment--looking for opportunities to lock as rates have moved higher, but the past two days have done the most to challenge that outlook since late January.
Loan Originator Perspectives
"We're retained yesterday's substantial gains, which were the result of (finally!) some Euro drama in addition to the looming sequester. Lenders passed along more of yesterday's MBS improvements today, and the pricing on loans I've priced have been the best in several weeks. I'm looking for some further improvements, but still locking the loans I have IF pricing works and I can pay my clients costs while getting them great rates!" -Ted Rood, Senior Originator, 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 but consistently since hitting their all-time lows in September and October 2012.
- Regardless of global or domestic economic weakness, the subsiding fear of a disorderly EU breakup will continue to prevent rates from getting back to those lows.
- This is very likely to be the case unless a similarly panic-inducing event were to come into focus, or if a disorderly break-up regained the spotlight.
- Sequestration, negative growth, and generally choppy political and economic environments around the world DO NOT constitute that sort of panic.
- This is a "rising rate environment" until further notice, though pockets of recovery and consolidation can provide smaller-scale opportunities against the larger-scale backdrop.
- (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).