May 16, 2013
Mortgage rates moved lower at their fastest pace in 6 weeks today, erasing most of the losses seen so far this week. Not all lenders have adjusted pricing at the same pace, however, and best-execution is still 3.625% for conventional, 30yr fixed loans. That means today's improvements came in the form of lower borrowing costs or increased lender credit, depending on the scenario.
Today's improvements were potentially important in the bigger picture. We began talking about this yesterday, saying that:
[Wednesday's] trading had the redeeming quality of NOT making a new low. We can't conclude anything from 1 session, but it does at least introduce the possibility that we're digging in at recent highs to make a range between now and next week's FOMC Minutes. This would look more likely if we see a repeat performance tomorrow.
Indeed we not only saw a repeat performance today, but a rally that was far from the equivocal and volatile mess seen yesterday. From an interest rate perspective, "rally" implies higher prices and lower rates. While we can't conclude that rally continues from here, it does reinforce yesterday's highs as an important defensive level--on that is now more likely to mark the high side of the rate range heading into next Wednesday's FOMC Minutes.
Loan Originator Perspectives
"Rates rallied remarkably today as a poor weekly employment report and tame inflation outlook boosted demand for MBS. Quotes I looked at gained near .5% in pricing from yesterday's levels. While the improvement is due and welcome, not taking it for granted just yet. Sentiment still points to rising long term rates, so will likely lock new submissions for most borrowers. Borrowers who failed to capitalize on early May pricing have gotten a second chance; now they just need to capitalize on it." -Ted Rood, Senior Originator, Wintrust Mortgage
"No rhyme or reason to the MBS market lately. Up and down and back again. Locking was the right move early in the week, but now the market does a u-turn. The yields want to go higher until a dose of reality comes back into the picture. I always say lock if the deal works for you. You might leave some money on the table, but you could end up in the hole too." -Mike Owens, Partner, Horizon Financial Inc.
Today's Best-Execution Rates
- 30YR FIXED - 3.625%, (3.75% not far from sharing the best-execution space)
- 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 challenged the long term trend higher, but failed to sustain a breakout
- EU and domestic economic data remain relevant to mortgage rates, but uncertainty over the Fed's bond-buying plans through the rest of the year is causing volatility
- The further we've progressed into 2013, the faster the swings have become
- (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).