After Starting Out Weaker, Mortgage Rates Finish Strong

Interest Rates

A strong Treasury auction and an uneventful policy statement from the Federal Reserve paved the way for Mortgage Rates
to improve to their best levels since late September/early October today.  Although the improvements haven’t translated to a lower Best-Execution rate, the costs involved in obtaining those rates should be slightly lower today than they were last Thursday (12/8/11). 

Today’s auction of 10yr Treasuries showed extremely high demand and at lower rates than markets had been trading.  Although mortgage rates are not based on US Treasuries, the Mortgage-Backed-Securities (MBS) that DO influence rates are similar to Treasuries and tend to trade in the same direction, even if it’s by different amounts.  We wrote about this extensively in a previous post: Why Aren’t Mortgage Rates Getting Lower as Fast as Treasuries?

After spending weeks at an average 4.0% Best-Execution, rates recently dropped to the next rung lower on the ladder at 3.875% late last week.  Two days of marginal weakness was beginning to reintroduce 4.0% Best-Ex rates at several lenders.  Rates were on a path higher again this morning, and 4.0% continued to proliferate, but the solid improvement this afternoon renders that phenomenon all but non-existent.


  • 30YR FIXED –  3.875%
  • FHA/VA 
    Back firmly to 3.75%
  • 15 YEAR FIXED –  3.375%, Approaching 3.25%
  • 5 YEAR ARMS –  2.625-3.25% depending on the lender

Lock/Float Considerations

The following has been a recurring part of our “lock/float considerations” in recent days:

When rates
have gotten as low as they are currently (in terms of Best-Execution),
there’s only been a few hours ever, when they’ve been able to move any
lower.  In other words, 3.875% is as low as Best-Execution has stably
been.  This is what we’re talking about as we’ve consistently said that
there’s limited improvements to be had under 4.0%.  If that ceases to be
the case, it would constitute a pretty big shift in the Secondary
Mortgage Market and we’re not there yet. 

This remains true, and historically, when rates get to current levels, “something” has always snapped them back up fairly quickly.  We might consider though, that the holiday season means these rates are generally not creating as much of a mad dash to refinance and the “overloading” that lenders have seen in the past at these rates could be slower to set in as a result.  That could mean that rates would find it easier to occupy current territory into the new year, but that assumes that markets will be generally stable at current levels.  That’s a lot to expect, even during the characteristically lower-volume late December time frame.

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