May 8, 2013
Mortgage rates were almost perfectly flat today, ending a 4 day trend higher, for now. That trend began on Thursday and of course saw it's biggest surge after Friday's Job's report. Rates continued drifting higher to start the current week, but at a lessened pace. The drift leveled off today after bond markets hit their weakest levels earlier this morning. Naturally, Conventional 30yr Fixed 'best-execution' remains at 3.5%, and with no change to average borrowing costs.
If there's an ideal time of day for bond markets to experience weakness, it's the early morning--at least as far as mortgage rates are concerned. The mortgage-backed-securities that most directly affect rates (MBS), start trading in the 7am hour and more actively by 8am. It's not until 9:30am that the earlier rate sheets of the day are generated by mortgage lenders, thus leaving at least an hour and a half of time for bond markets to work the kinks out before any early morning weakness is passed on to consumers in the form of higher rates.
This indeed, would have been the case today if bond markets hadn't improved right out of the gate. When we reference this "improvement," it means that the prices of things like US Treasuries and MBS are moving higher. When those prices are higher, lenders are willing to "pay more" to obtain mortgages of a certain rate. In fact it's these ebbs and flows in the PRICE of mortgage-backed-securities that is most readily observed as the changes in borrowing costs associated with the rate you're being quoted.
This is why the actual interest rate you're quoted might not change from day to day, but the closing costs or lender credit are rarely unchanged. Today was one of those rare days where neither side of the interest rate equations changed (though some lenders repriced positively in the afternoon), and it's tempting to hope this marks an end to the trend of weakness that's followed Friday's job's report. Indeed it might, but we'd advocate keeping a balanced view. Floating is much less risky than it was last week, but markets didn't give any clues as to their next move today. Rates still look like they have yet to decide if they're topping out here, or just catching their breath before a more concerted move higher.
Loan Originator Perspectives
“MBS market continued to define its current range today, as rates remained stable despite a lackluster treasury auction. Some lenders improved pricing marginally this PM, but good news for borrowers and loan officers is that stability in MBS market encourages lock desks to pass along better pricing, even when bonds are flat. We're still conservative on floating, especially for rate sensitive clients.” -Ted Rood, Senior Originator, Wintrust Mortgage
"Nice to see some green in MBS markets today. Not so much that rates are moving down .125% but it's a start, and the first green since last Thursday. Floating today for clients with longer horizons to see if these gains can hold. " -Julian Hebron, Branch Manager, RPM Mortgage.
"Hopefully we have found support following the better than expected payrolls data. The only loans I would consider locking today are loans closing within 10 days, but I think it would be worth the risk to even float those overnight in hopes of better pricing tomorrow. " -Victor Burek, Open 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
- Lingering concerns over European finances have helped keep Core EU rates low, which has some "spillover effect" onto US 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).