May 20, 2013
Mortgage rates continued May's nearly constant trend higher to begin the week, though the pace of increases is slower compared to that seen on Friday. Even so, it brings rates dangerously close to their highest levels of 2013 (which are also the highest levels in 1 year). Best-execution for Conventional, 30yr Fixed Loans is in transit between 3.625% and 3.75%. Best-ex is also more subjective from borrower's points of view at the moment due to the fact that the most efficient rate on most rate sheets is 3.625% yet it might leave some borrowers bringing more to the table in terms of closing costs than they'd otherwise like.
In other words, we're now getting into rate territory where 3.625% won't necessarily be a "no point" quote for the best qualified borrowers (but as always, this can vary greatly based on specifics). At these levels, it more sense than usual to look at what options are available to you in terms of buying your rate down or up (where "down" means bringing more cash to the table in exchange for a lower rate and "up" means lowering your closing cost burden in exchange for a higher monthly payment). Whatever the case, it's not safe to assume that rates will get better simply because they've been rising so quickly. While there is some logic behind the idea of "it has to stop some time," we're not there yet, and won't know where "there" even is until Wednesday's FOMC Minutes.
Loan Originator Perspectives
"Rate markets opened well today, but the gains were long gone by noon. Fed tapering is the concern du jour, and traders are anticipating Federal Reserve minutes to show increasing chances the Fed will soon lower its MBS purchases. We advised locking on any gains last week, and that sentiment still holds." -Ted Rood, Senior Originator, Wintrust Mortgage
"There is no stopping the stock market. With talk of a winding down of QE, this could help us as stocks won't like that. We'll find out with the release of the FED minutes how soon this could happen. Locking has been the right call since May 3rd. I would continue to lock until further notice. " -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).