April 12, 2013
Mortgage rates finally extended yesterday's move lower, falling at an even quicker pace today. Weaker Retail Sales data contributed to a morning rally that was already underway in European trading overnight. Mortgage Lenders adjusted rate sheets lower to a greater extent than we typically see after such market movements, easily putting 3.5% back in force as the best execution (what is this?) for 30yr Fixed loans. For many lenders, this means the best rate sheet offerings of the week, though some are not quite back to Monday's levels. Friday's lows remain elusive, but then again, so do the trading levels that spawned them.
Yesterday, we commented on bond market strength (where "stronger" = "lower rates") being surprisingly reassuring. That had to do with Treasuries and MBS ("mortgage backed securities" which most directly affect rates) going against the grain as far as economic data was concerned. The data suggested weaker bond markets, yet they held their ground. We noted that COULD speak to some innate level of resolve, but that today's Retail Sales data could throw a wrench in the works.
As it happens, weak Retail Sales results were in line with today's bond market strength, so we can't really know how firm the resolve would have been in the face of further contrary data. More focus will shift back to Europe next week, introducing more potential volatility surrounding headlines. For those inclined to float, negative headlines out of Europe could help us extend the recent gains. For those thinking about taking the risk off the table, we'd note that we're very close to the best levels of the past 3 months--levels that would look like a great lock opportunity against almost any other day in 2013.
Loan Originator Perspectives
"Last week's employment figures gave fuel to the rally we desperately needed. Then this week we watched the majority of those gains dwindle away in the first few days only to bounce back yesterday and today. We're not as low as we were last Friday, but market movements in Treasuries and MBS have given reason to believe the rally has some legs. With stock indexes at all time highs, quarterly earnings reports coming, and potential headline risks from Europe and Asia I am a believer that longer term scenarios will benefit by floating. Closing in the next 2 weeks should lock up today, do not float the weekend.." -Constantine Floropoulos, Quontic Bank
"More weak data moves rates lower. The tide seems to be shifting. I favor floating over the weekend." -Victor Burek, Open Mortgage
"My theme for the week has been very clear and I'm sticking to it to close the week: a locking bias to capture the rate dip while it's here. Rates aren't just driven by MBS price levels rising but also whether banks decide to pass that better pricing to consumer rate sheets ahead of the weekend. In my case, we're seeing the better pricing so we're taking it for clients who are ready to go (meaning they've provided all of their personal and property documentation we need to properly pre-approve them). It's also a good time in rate markets for buyers going into a home shopping weekend---anyone who gets into contract will likely see nice low rates on Monday. " -Julian Hebron, Branch Manager, RPM Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.5%
- FHA/VA - 3.25% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.75-2.875%
- 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).