March 27, 2013
Mortgage rates moved lower today at their fastest pace in more than a week, bringing them in line with their lowest levels since last week's Cyprus-related market movement. Lender pricing strategies continue to be varied and some lenders didn't improve nearly as much as the average. That said, it was enough to clearly tip the scales in favor of 3.625% as a prevailing Best-Execution rate (what is this?) for 30yr Fixed loans. 3.75% and 3.5% may be more viable depending on the scenario and the lender.
Keep in mind when we reference these adjacent rates that differences in borrowing costs are implied. For example, 3.5, 3.625, and 3.75% are all likely available from one lender, but different lenders have different costs associated with moving from one rate to the next. In almost all cases, the cost to move down to 3.5% from 3.625% is higher than the cost to move from 3.75% to 3.625%.
The market movement that helped rates lower was seen almost exclusively in the overnight session during Asian and European trading hours. Markets are still somewhat cautious with respect to Cyprus reopening banks tomorrow, but have have mostly moved on to worrying about Italian political headlines ahead of a three day weekend. US Treasury and mortgage rates have been quite well connected to Italian credit spreads (which can be thought of as a gauge of economic risks in Italy--the higher those spreads, the lower our rates). As headlines came across and following an Italian debt auction, those spreads led US rates to open at lower levels.
Tomorrow, markets will juggle what is expected to be important inbound news regarding Italy's political situation as well as several important US economic reports. Finally, the last of the week's Treasury auctions will arrive earlier than normal and US markets will close early due to the Good Friday holiday the following day (markets will be fully closed on Friday).
Loan Originator Perspectives
"Nice move today with benchmark treasuries following more bad news out of Europe. Lenders have passed along some of the gains but seems they held a bit back. The market has an early close tomorrow and completely closed on Friday which in my opinion makes lenders a little conservative with pricing. I would recommend floating through the weekend but if you must lock before the weekend, today would be the day." -Victor Burek, Open Mortgage
"Not a lot of logic to today's big MBS rally, but it's helping rates, and we're locking clients who are ready to move forward on purchases or refis. It's the best rate day of this week so far, and in the generally rising rate environment so far in 2013, better rate days like this aren't to be ignored. " -Julian Hebron, Branch Manager, RPM Mortgage
"Thanks Cyprus. Let's hope the Eurodrama continues. If so look for rates to continue to improve. We might even get a spooked stock market that would help bonds to some extent.
" -Mike Owens, Partner, Horizon Financial Inc.
Today's Best-Execution Rates
- 30YR FIXED - 3.75%, 3.625% coming back into view
- FHA/VA - 3.375-3.5% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 3.00%, 2.875% coming back into view.
- 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).