February 4, 2013
Mortgage rates regained a good amount of lost ground today as most lenders' rate sheets were in line with or better than last week's rates. The overall movement wasn't enough to justify a shift back to 3.5% Best-Execution from the recently more prevalent 3.625%, but it's a step in that direction. The differences in rates would be more noticeable in terms of the closing COSTS or lender credit as opposed to the rates themselves.
(What is A Best-Execution Mortgage Rate?)
Bond markets were fairly calm in their positivity today ("positive" movement in bond markets connotes higher prices of Mortgage-Backed-Securities, which equate to lower rates). That said, it continued to be the case today that movements in interest rates (both in Treasuries and mortgage markets) were reasonably well-connected to the movements of stock prices. While this certainly isn't always the case, this relationship tends to pan out more often than not. In any event, it's interesting to consider that stock prices edged down to close at their lowest levels in more than a week--the same generally being true for mortgage rates as well.
This connectivity stands its best chances of being present when there is limited economic data and/or events, as is the case this week. There are a few scattered reports in the mornings, but no major releases prompting any sort of "edge-of-seat" anticipation as there were last week. So the trading action itself is all the more interesting and we'll continue to keep an eye on bond market movements relative to stocks. If stocks continue to lose ground, rates stand a good chance of holding theirs. Still, that's more "something to hope for" if you've already made the calculated decision to float. Given the recent environment, locking with gains that erase a week of losses is a prudent decision.
Loan Originator Perspectives
"Go ahead and lock your rate now. The downward trend could continue, but we could easily give back all of the recent improvements. If reality comes back into the picture rates could return to last years levels. As long as stocks are heading higher and higher, bonds will be susceptible to selloffs resulting in higher yields and mortgage rates. A dose of the European reality helped us today. " -Mike Owens, Partner with Horizon Financial, Inc..
"The last few trading days have provided another example of how quickly your rate quote can disappear. We are fortunate to see a bounce back, this time. I am advising all clients to lock. The potential risk outweights the potential reward " -Kenneth Crute Branch Manager Prime Mortgage Lending Inc.
"Today is a welcome turnaround for rates, but MBS and Treasuries still at risky technical levels despite today's rally. The rate spike has helped borrowers understand that target rates are elusive. Today we're hitting many clients' target rates and locking accordingly." -Julian Hebron, Branch Manager, RPM Mortgage.
"It appears the market volatility will continue until we confirm that either the economy is roaring or things are not as good as some of the talking heads are saying. Although we agree with the latter, our advice is to take a riskier approach into these moves, but lock as soon as you hit near your target rate/spread. Buy the dips sell the rips! Floating for further improvement will probably lead to disappointment in this environment. You will need to closely monitor these swings, and consider locking on a day like today." -Constantine Floropoulos, Quontic Bank.
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).