For the first time since late January, Best-Execution Mortgages Rates moved back to 4.0%.  Over the past month, the rate averaged 3.875% despite plenty of fluctuations in terms of closing costs.  Friday’s weakness brought the average of the lenders we survey as close to the 4.0% mark and today’s weakness in the bond markets resulted in more lenders offering 4.0% as a best-execution rate, although 3.875% remains at a few of the more aggressively-priced lenders. 

Additional reading: A previous post with more detailed discussion about Best-Execution calculations.

Last week, we discussed Monday’s upcoming meeting and vote on the Greek bailout as a potential high-risk event for mortgage rates.  Indeed there was never much of a chance that this would NOT be the key market mover to start the current week, although the questions remained as to the direction of that movement. 

Now that we’re confronted with higher rates to begin the week, the question becomes whether or not this will prove to be a brief foray into 4.0% best-execution territory or not.  The next few days could be informative in that regard as they naturally provide a venue for ongoing reactions to the Greek bailout as well as Treasury auctions.  The latter can speak to the impact of the Greek bailout on the demand for US Debt. 

We’ve already seen today’s 2yr Treasury auction garner somewhat less healthy demand than usual, and at slightly higher than expected rates.  But 2yr Treasury auctions are of limited importance to the MBS (“mortgage-backed-securities”) that most directly influence mortgage rates.  Tomorrow’s 5yr Note Auction will be more informative in that regard, but the overriding theme continues to be the evolving situation in Europe. 

Other than unexpected, unscheduled headlines, the next major event on the calendar for the Greek bailout will be the determination of their private sector involvement, set to begin March 8th.  Yesterday’s meeting already decided the percentage of the losses that Greek bondholders would be forced to take if they participate and March 8th is the date that participation can begin.  While we could certainly see plenty of volatility in rates between now and then, we could see even more after these so-called “swaps” begin.  The fact that the Employment Situation Report (the most important piece of domestic economic data each month and a notorious mover of mortgage rates) prints during the Greek private-sector swap process merely compounds the issue.

Today’s BEST-EXECUTION Rates

• 30YR FIXED -  4.0% more prevalent.  Some 3.875%’s remain
• FHA/VA -3.75%
• 15 YEAR FIXED -  3.25%
• 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
• There are technical reasons for that as well as fundamental reasons 
• Lenders tend to get busier when rates are in this “high 3′s” level
  and can throttle their inbound volume by raising rates or costs.
• While we don’t necessarily think rates are destined to go higher,
  given the above facts, there seems to be more risk than reward regarding
  floating
• But that will always be the case when rates operating near historic lows
• (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).

Article source: http://www.mortgagenewsdaily.com/consumer_rates/248217.aspx

Mortgages Rates are higher for the 2nd day in a row.  Unlike the movement we normally see, which limits itself to affecting closing costs as opposed to the quoted rates themselves, today’s deterioration leaves 4.0% looking like the better deal for enough lenders that we’d make a note of it’s increasing prevalence, although the average across all lenders in our survey is still closer to 3.875%.

Additional reading: A previous post with more detailed discussion about Best-Execution calculations.

Weakness aside, today was fairly quiet for the MBS market (MBS = mortgage-backed securities, which most directly influence the rates offered by mortgage lenders) as well as Treasuries.  Most of the activity was seen in the early morning after the European Central Bank said that it might allow the central banks from various Euro countries to write-down their Greek holdings, effectively improving Greece’s chances of getting their 2nd bailout approved on Monday.

Events and headlines surrounding this bailout have been the market’s focus for a few weeks now, overshadowing most domestic economic reports and other traditionally important market movers.  While it’s true that we’ve come to expect negotiations over Greek bailouts to not come without surprises and alterations, markets are still burdened with the need to prepare for the “if’s.”  In such cases, traditional metaphors apply, such as waiting for shoes to drop or knives to fall.  In short, no one wants to commit too strongly to either side of the spectrum of possibilities.

Because of this, we are left with markets (both capital markets and Mortgage Rate Markets) that are in a sort of neutral position with respect to broader trends.  Take 10yr Treasuries at 2.03% for example.  Since the broader rally began in late summer 2011, this is the mid-point between the absolute highs and lows.  In similar fashion, mortgage rates are on a fence between 3.875% and 4.0% Best-Execution levels.  Because of that, floating over the weekend continues to be a risky proposition considering that rates could just as easily shift into 4.0% territory as they could bounce back down into 3.875%’s.  We don’t think that’s any more likely to happen than anything else, simply that risks of movement in either direction are elevated.

Today’s BEST-EXECUTION Rates

• 30YR FIXED -  3.875%, more 4.0% showing up
• FHA/VA -3.75%
• 15 YEAR FIXED -  3.25%
• 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
• There are technical reasons for that as well as fundamental reasons 
• Lenders tend to get busier when rates are in this “high 3′s” level
  and can throttle their inbound volume by raising rates or costs.
• While we don’t necessarily think rates are destined to go higher,
  given the above facts, there seems to be more risk than reward regarding
  floating
• But that will always be the case when rates operating near historic lows
• (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).

Article source: http://www.mortgagenewsdaily.com/consumer_rates/248000.aspx

Mortgages Rates reversed a recent trend of gradual improvement, moving higher today after a better-than-expected read on employment from this morning’s Jobless Claims report as well as news that the ECB will swap out their Greek government bonds this weekend.  30yr Fixed Conventional Best-Execution Rates continue to operate in 3.875% territory on average, and the closing costs associated with those rates had been nearing the lower end of their historical range.  While 3.875% Best-Execution remains intact today, the cost associated with obtaining them is higher on average.

Additional reading: A previous post with more detailed discussion about Best-Execution calculations.

This morning’s Jobless Claims report showed 348k new claims this week versus an expectation of 365k.  When data indicates that the labor market is faring somewhat better-than-expected, bond markets tend to move higher in yield.  It’s not always a linear relationship, but is generally true, and in line with the market’s reaction to the data.  But the domestic economic situation is scarcely the biggest contributor to the current interest rate environment.

Concerns over the potential fallout and/or inability to contain the European debt crisis are the key factors keeping interest rates at historically low levels.  While Treasuries are the direct beneficiaries of that turmoil, MBS (the “mortgage-backed-securities” that most directly influence mortgage rates) get to come along for the ride.  Today’s news that the European Central Bank (ECB) would swap out its Greek bond holdings over the weekend basically amounts to an injection of capital into Greece’s balance sheet (read more about it HERE if you’re interested).  A lower debt burden for Greece helps alleviate some of the fears of the aforementioned fallout.  Since those fears are keeping rates lower, when the fears lessen, rates respond by moving higher.

Another aspect of today’s news from Europe was that the group of finance ministers tasked with voting on the current Greek bailout is set to meet again on Monday to potentially approve that bailout.  If that happens, then today’s ECB actions grease the skids for Greece to negotiate and finalize a deal with its private sector bond-holders.  And if ALL of that happens before Tuesday morning, it will probably have a fairly negative impact on rates. 

Now…  Of course we have seen time and time again that things rarely happen exactly as expected when it comes to the EU debt crisis.  So we certainly aren’t planning on any catastrophic spike in rates and more so than we plan on a nice improvement.  Both are possible.  But the fact that it COULD happen, and on a market holiday (Monday is President’s Day), means that Traders are essentially heading into 3-day weekend with big potential market movement waiting on the other side.  That could cause them to have a more defensive stance than they otherwise might Tomorrow.  All that to say, it’s unlikely that we’ll see a noticeable bounce back tomorrow unless we get some new info out of Europe that changes the expectation for the weekend bond swap and Monday vote. 

So while costs are indeed higher today, Best-Execution rates are still at their all time lows and we’d advocate thinking more about protecting yourself from risks in the near term future than about lamenting missed opportunities if you decided not to lock yesterday.  Sure, rates could get lower next week and it would be natural to regret locking today if that turns out to be the case, but it wouldn’t compare to the level of regret that would come from NOT locking today and seeing rates move sharply higher next week.  We say this NOT to advocate locking vs floating, but rather, if you were inclined to lock, not to second guess that decision simply because yesteray’s rates were better.

Today’s BEST-EXECUTION Rates

• 30YR FIXED -  3.875%
• FHA/VA -3.75%
• 15 YEAR FIXED -  3.25%
• 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
• There are technical reasons for that as well as fundamental reasons 
• Lenders tend to get busier when rates are in this “high 3′s” level
  and can throttle their inbound volume by raising rates or costs.
• While we don’t necessarily think rates are destined to go higher,
  given the above facts, there seems to be more risk than reward regarding
  floating
• But that will always be the case when rates operating near historic lows
• (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).

Article source: http://www.mortgagenewsdaily.com/consumer_rates/247822.aspx