April 15, 2013
Mortgage rates moved lower for the 3rd straight day, moderately extending the solid improvements seen late last week, and bringing rates very close to 2013 lows. Depending on the rate, some lenders are actually slightly lower in cost than they were on April 5th after the weak Employment Situation Report resulted in the best rate sheet offerings since early January, but the majority are just marginally higher. Either way, best execution (what is this?) for 30yr Fixed loans is near is firmly 3.5% now, and lower rates may be viable depending on your scenario.
Bond markets including US Treasuries and MBS (the mortgage-backed-securities that most directly influence mortgage rates) usually move in predictable ways in response to economic data. For instance, after last week's ugly employment data, bond markets benefited as the suggested economic weakness fueled demand for safer investments with steady cash flow. As demand increases, prices rise and yields--or interest rates--fall.
While that connectivity was easily observable surrounding that employment data, there has been more of a disconnect over the past few trading sessions. Fortunately for the actual rates that are making it onto rate sheets, mortgage lenders had some catching up to do with trading levels in the marketplace. The actual trading levels are showing increasing signs of exhaustion. This doesn't necessarily mean rates are moving higher, but unless MBS can make it past the current bumps in the road, it's a risk that continues to suggest a defensive strategy with rates near their lows of the year.
Loan Originator Perspectives
"Nice gains in the market earlier today, but running out of steam this afternoon. Still waiting for those gains to be fully passed along on rate sheets, will consider floating for a few days on new loans, but guarded against a bounce if it looks like one is materializing. In any case, pricing today is better than last week's, which bodes well for both borrowers and loan officers for the remainder of the week." -Ted Rood, Senior Originator, Wintrust Mortgage
"Rates are better and could continue on the path to lower rates. I have a feeling lower rates are coming. I wonder if gold prices falling hard could help us in any way. " -Mike Owens, Partner, Horizon Financial Inc.
"Another day, more weaker than expected data. If you floated over the weekend, give lenders some time today to pass along the improvements then if you are within 10 days of closing, i would strongly recommend that you consider locking. Longer term closings, I would continue to float." -Victor Burek, Open 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).