March 15, 2013
Mortgage rates improved modestly, capping a week that's seen rates either move sideways or slightly lower every day. Today's stability and ultimately, improvements came as the result of uneventful overnight trading and a small surge in "asset allocation" trading out of stocks and into bond markets after stocks opened. General bond market strength benefits MBS, the securities that most directly affect mortgage rates. Weaker-than-expected Consumer Sentiment data continued to keep demand high for less-risky assets, ultimately leading many lenders to offer improved rate sheets in the afternoon. The net-positive week brings 3.625% back into focus as a Best-Execution rate, but 3.75% is more prevalent. Lower rates are available for increased upfront costs, but this becomes less and less efficient from 3.625%.
(What is A Best-Execution Mortgage Rate?)
A full week of mortgage rate movement with no bad days?! Surely, this is madness, no? No... The current week is a great example the sort of consolidation that can either serve as a moment for rates to catch their breath before moving higher or as a genuine staging area of a push back toward lower rates. Unfortunately, recent history favors the former, and the latter will only be detectable in hindsight. In other words, it makes more sense to lock after modest gains recently, than it does to hold out for more. The prospect of further improvements is very likely tied to next week's FOMC Announcement and Bernanke press conference, though unscheduled headlines may be lurking as Italy reconvenes Parliament for the first time since the election debacle.
Loan Originator Perspectives
"Finally gaining back some ground in MBS last few days, and today continued the streak. We're still a long way from the low rates of late 2012, but at least we're headed in the right direction. Calling my clients who haven't yet refinanced, this is a great opportunity for them to move forward!" -Ted Rood, Senior Originator, Wintrust Mortgage.
"We're locking loans as purchase clients get into contract and as refinance clients send in all materials to be properly pre-approved. Holding for rates to return to record lows has proven futile since January. Some miscellaneous dips of .125% have occurred in the past 2 months then rates rise again within 1-2 days. That's more upside risk than most clients are willing to take." -Julian Hebron, Branch Manager, RPM Mortgage.
Today's Best-Execution Rates
- 30YR FIXED - 3.75%
- FHA/VA - 3.375-3.5% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 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).