April 17, 2013
Mortgage rates edged modestly lower today, signifying some level of resolve to remain at the more aggressive levels of the recently lower range in April. There were no significant scheduled economic reports today--a fact that can make for increased volatility, as it did today. Most of the volatility was mortgage-rate-friendly as the mortgage-backed-securities (MBS) that most directly affect rates swung into their best territory of the week by 1pm. Best execution (what is this?) for 30yr Fixed loans remains at 3.5%, with borrowing costs slightly lower than yesterday's in most cases.
Today is a curveball for the broader outlook. After several solid days of improvement beginning last Friday, yesterday's weakness caused us to question whether or not the trend of improvement was reversing or leveling off. If MBS had weakened today, and if rates moved higher, it would have been a clearer suggestion that a bigger-picture reversal might be at hand. Instead, today's strength makes a far more equivocal suggestion. On the one hand, it's certainly a positive development for those hoping for lower rates, but perhaps more importantly, it is not sufficient to rule out the ongoing possibility that we've stalled out at the best levels of the past 2 weeks (today's rates shares that honor with Monday's). Tomorrow's relatively busier calendar of scheduled data could help facilitate a decision.
Loan Originator Perspectives
"Nice rally in the rate markets today as stock levers and terrorism concerns spurred demand for the safety of MBS. I'm cautiously floating new apps, at least for a day or so, to maximize my clients' pricing. Nice to see that we're establishing a new, lower rate range." -Ted Rood, Senior Originator, Wintrust Mortgage
"Rates are about the same as yesterday but some positive reprices are due and should hit before days end. Locking is the safe play and pricing improvements are not exactly monumental. Risk reward factor needs to be considered, but floating is not a bad idea in some cases." -Mike Owens, Partner, Horizon Financial Inc.
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).