Despite Increasing Stratification Mortgage Rates Remain Flat On Average

Interest Rates

Mortgage rates were broadly unchanged on Wednesday, but offerings vary depending on the lender.  While most lenders’ rate sheets are in similar territory to yesterday’s latest, some lenders are notably higher in cost.  A few others improved just slightly.  Flat rates overall means that 3.375% remains the dominant best-execution level for 30yr Fixed though we’d note that the level of stratification between lenders is much higher than normal at the moment.

(Read More:What is A Best-Execution Mortgage Rate?)

Markets were generally tepid today, especially overnight and into the morning hours.  Later in the day, a strong 10yr Treasury Auction helped Mortgage-Back Securities (MBS) move to their best levels of the day, resulting in several lenders recalling rate sheets for mid-day improvements.

Long Term Guidance: While the recently high degree of uncertainty remains very much intact, the Fed’s decision to specifically target Mortgage-Backed-Securities in a third round of Quantitative easing provides a supportive undertone for mortgage rates.  We’d still advocate not trying to get too far ahead markets.  In other words, we wouldn’t try to guess how low or how high rates might go before changing course.   Rates remain near all time lows and risks of volatility remain high.  Those factors suggest that you stay vigilant regarding the day-to-day swings in mortgage rates.  If you’re floating, set a limit as to how high rates would have to go before you cut your losses and locked.  Similarly, set a target of how low rates would have to get before you lock.

Loan Originator Perspectives

“Rates have been pretty darned flat, at least for FHA/VA loans.
Conventional pricing has suffered a little from the new guarantee fees
implemented last week or so. My biggest focus is on helping clients
realize how important it is to start their loans (whether we float or
lock), and to educate those with limited/no equity on the HARP program.
Fiscal cliff hasn’t gone away, and won’t anytime soon. How that will
affect the bond market isn’t certain, but more likely it will worsen
rates than improve them.” -Ted Rood, Senior Originator, Bank Star

“Rates are mainly unchanged from yesterday. I’m finding that most
clients prefer to lock to avoid any risk to rates increasing. This is a
wise move in my opinion and my days as a floater are over. I still
see us hitting a wall to lower rates due to volume and capacity issues.
” –Mike Owens, Partner with HorizonFinancial, Inc.

Today’s Best-Execution Rates

  • 30YR FIXED – 3.375%
  • FHA/VA – 3.25% (varies more between lenders than conventional 30yr Fixed)
  • 15 YEAR FIXED –  2.75%
  • 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
  • Rates could easily move higher or lower, but given the nearness to all time lows, there’s generally more risk than reward regarding floating
  • This 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).

Leave a Reply