April 30, 2013
Mortgage rates extended their run into 2013 lows today, but only by small margins. The movement is essentially similar to yesterday's and further supports the case for a shift from 3.5% to 3.375% for the Conventional, 30yr Fixed best execution rate. The borrowing costs associated with 3.5% are at their 2013 lows while those associated with 3.375% aren't quite back to early January levels.
That means that that the lowest rates are the slowest to "feel the love" from the interest rate rally since topping out in mid March. This is normal behavior in the mortgage rate world where there's not simply a "going rate," but always several adjacent rates with corresponding costs associated. That said, the shift between 3.375% and 3.5% has more to do with the DIFFERENCE in costs between those two rates, and the fact that current buy-down costs may make sense for an increasing amount of borrowers.
This has less to do with which direction rates move on any given day and more to do with how long rates hold steady combined with expectations about future volatility. This is another reason that the lower rates haven't caught up to 3.5% (in terms of what each of them cost now vs. January). There are several events coming up in the next three days that can have a big impact on trading levels in bond markets, and consequently on mortgage rates. The first of these will happen before any lenders release rates tomorrow, and can either help modestly extend the recent rally or send rates quickly back to last week's levels. The potential for movement continues to grow through the week, reaching an apex on Friday, following the Employment Situation Report.
Loan Originator Perspectives
"This morning's MBS pricing was best of the year, and rate sheets reflected further gains. As the day progressed, we settled at levels near yesterday's and several lenders repriced worse. The rest of the week holds high risk events, including NFP and Fed minutes. In a potentially volatile market, floating carries risk, but a bad jobs report could improve rates." -Ted Rood, Senior Originator, Wintrust Mortgage
"Without a doubt, if you are within 15 days of funding you should be locking today. That strategy has played out well over the last few weeks, but we do have the employment report on Friday which can move the markets. With rates at their best levels this year, there is much more room to go higher than lower. A better report could cause rates to jump quickly while a worse report would only hold rates here or slightly lower. So, if closing within the next month you should lock before Friday's NFP. " -Victor Burek, Open Mortgage.
"Rates are the best of the year or close to it. Hard to see much further movement down unless the NFP report is like last months. Even then hard to say. Tommorrow's ADP could help us predict what Friday holds in store for the #. I think it's going to be another bad number and will further solidify the economic slow down that is taking place. Not we ever got out of neutral to begin with. I still lean towards locking as always and NFP weeks can always be big market movers. " -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
- 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).