Mortgage Rates improved slightly today after rising somewhat yesterday. All in all, the movement was muted, and most of it served to narrow the gaps in rate offerings between lenders as opposed to suggest a cohesive movement in one direction or another. Rates continue to operate in a fairly narrow range resting on all-time lows. Best-Execution rates on 30yr Fixed Conventional Loans have been in a range between 3.625% and 3.75%, but are closer to 3.625% after today's improvement/consolidation.
(Read More:What is A Best-Execution Mortgage Rate?)
Once again, rate sheet movement belied the market movement today, but this time it worked in our favor, with rate sheet improvements coming despite slightly higher yields in bond markets. That said, the pace of the improvement leaves much to be desired, and it's hard to argue that lenders should be eager to move rates aggressively lower when current rates have created nearly unprecedented refinance demand.
Factor those capacity issues in with the the unprecedented concentration of market-defining events taking place over the next 6 days (these include the Greek elections on Sunday, an EU Summit over the weekend, the FOMC policy announcement next week), and there's increasingly limited incentive to float in the short term. That's not to say that the upcoming volatility couldn't take rates even lower, just that weakness is more likely to be more abrupt than strength if we do indeed see an abrupt reaction to upcoming events.
Here's something we said on Wednesday that bears repeating at least through Friday:
Though there are many more bits and pieces creating risk and uncertainty in the coming days, these "biggies" are more than enough to cause the volatility that we're seeing in markets over the past two days. Big moves are at stake and although there's no mathematical or logical reason to believe markets will move one way vs the other, the SIZE of the risks make floating very dangerous in this environment. Again, it's not that floating wouldn't pay off here, or couldn't, but particularly with respect to floating over the weekend, we could just as easily wake up to 4.0%+ Best-Execution rates on Monday as we could 3.5%, not to mention that things could go right back in the other direction after the FOMC Announcement!
Long Term Guidance: We'd continue to advocate not trying to "get ahead" of current market movements as a high degree of uncertainty is pervasive. While it's a reasonably safe assumption that European concerns will generally help rates stay lower than they otherwise would be, that "otherwise would be" part is very much a moving target. Best bet is to focus on the fact that rates are at their all time lows, and can change quickly based on events that aren't "scheduled" or able to be forecast. Risk vs reward for floating vs locking looks a bit larger than we'd like, but not out of the question for those who understand the risks and have an exit strategy if things don't go their way.
Loan Originator Perspectives
Matt Hodges Loan Officer, Presidential Mortgage Group
The Chicago way - lock early and often. Look folks.. rates are fantastic. Best in my history as a loan officer for 14 years. Yes, you can wait until your new construction project hits 60 days, but if you are 30, 45 days out on closing... LOCK!
Jason York, Vice President of VA Operations at Prime Mortgage Lending, Inc
Sometimes the best question is "Is it better to have locked and lost, than to have never locked at all?" I know that is corny, but it's true in this market. Sure you could maybe, possibly squeak out a .125% better rate, but there is also a higher chance you could lose .25% in the course of one afternoon!
Jeff Statz, Mortgage Advisor, Network Funding, L.P.
I see some great strength in MBS trading sideways, granted all the market-affecting news. The sideways trading, however, is no't likely to last. This stored energy is likely to cause a large move, better/worse is still unseen. The added stability in the sideways trading, however, is likely to add a level of confidence to investors. MBS stability should benefit rate sheets as it's not just a one night stand.
Mike Owens, Partner with Horizon Financial, Inc.
Still firmly believe in locking as rates as good as ever. With renegotiation options, I see no reason to float.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.75%
- FHA/VA -3.75%
- 15 YEAR FIXED - 3.125 edging down to 3.00%
- 5 YEAR ARMS - 2.625-3. 25% depending on the lender
Ongoing Lock/Float Considerations
- Rates and costs continue to operate near all time best levels
- Current levels have experienced increasing resistance in improving much from here
- Rates could easily move higher or lower, but given the nearness to all time lows, there's generally more risk than reward regarding floating
- But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
- (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).