April 29, 2013
Mortgage rates continued lower today, after officially hitting the lowest levels of the year on Friday. Bond markets including MBS (the "mortgage-backed-securities" that most directly affect mortgage rates) generally held steady despite advancing stock prices. More specifically, MBS actually did a better job holding their ground than 10yr US Treasuries, which tend to move in the same direction. Whereas Treasuries are just slightly weaker than Friday's latest levels, MBS are slightly stronger. This allowed lenders to adjust rate sheets further into the year's best territory with 3.375% now becoming a contender for the Conventional, 30yr Fixed best execution rate, which has been at 3.5% after topping out at 3.625% - 3.75% earlier this year.
As we noted last week, the last few days of any given month can be beneficial for bond markets. This has to do with money managers buying more MBS and Treasuries to keep portfolios in line with whatever indices happen to comprise them. This could account for some of the ability to hold our ground fairly well today despite the gains in stock markets. That said, it's not the sort of thing that we'd advocate counting on to create a similarly favorable situation tomorrow.
Rates markets have held steady or improved for 7 weeks now after mid March saw the highest rates in nearly a year. There are several important events and reports coming in the following days that can either help extend that winning streak or send it packing. The biggest among these will start on Wednesday, so if you're interested in taking the risk of bigger movement off the table after a very solid April, tomorrow is the last salient opportunity. Note: there's no way to be sure that Wednesday will realize it's potential as a market mover, and indeed Friday is the biggest risk, but the POTENTIAL volatility is increasing. If it arrives, it could help or hurt.
Loan Originator Perspectives
"More disappointing economic news helped MBS improve marginally today. Secondary desks also passed along more of last week's gains to current rate sheets. Best execution rates for FHA and VA loans now solidly at 3.25%, Have to love that!" -Ted Rood, Senior Originator, Wintrust Mortgage
"I am continuing with the same strategy of the last month or so, float until you are within 15 days of funding then lock. " -Victor Burek, Open Mortgage.
"Rates ended last week within striking distance of record lows, they're holding that level today and could do the same tomorrow. Then Wednesday’s Fed rate/QE policy announcement and Friday’s jobs report for April will set the tone. Rates started dipping when the March jobs report bombed on April 5. And rates spiked twice this year after minutes from Fed meetings (which are released three weeks after each Fed meeting) revealed a growing consensus toward backing off the pace of QE by the end of the year. " -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
- After rising consistently from all-time lows in September and October 2012, rates are challenging the long term trend higher
- Some level of panic over the European situation has returned, to the benefit of domestic interest rates.
- Domestic economic weakness has played a role in helping balance the outlook for Fed bond-buying.
- We're at a crossroads where we'll soon see if the "rising rate environment" remains intact or is successfully challenged.
- (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).