Mortgage rates were significantly lower to start the day, and despite rising slightly in the afternoon, managed to end the week at the lowest levels since late May. For borrowers hoping to exit the recent roller coaster of rate volatility it’s a small victory in the sense that it should amount to an eight of a percent drop in interest rates for most scenarios. The recently prevailing best-execution rate of 4.125% is now being overtaken by 4.0% for Conventional 30yr Fixed Loans.
Conclusions about today’s improvements are the same as yesterday’s: dips in rates present opportunities to lock rather than cues to float unless you’re not planning on locking until after next Wednesday’s extremely important FOMC Announcement. This dip happens to be the best we’ve seen in 2 weeks and thus, presents the best opportunity. To be clear, however, if next Wednesday proves beneficial for interest rates, those who took the risk would likely be well-rewarded. Conversely, if it’s bad for rates, we could easily move right back over recent highs.
Loan Originator Perspectives
“Strong rally this AM followed by pronounced PM selling has reinforced
our prior view that MBS gains are fleeting, and overall rate trend is
still up. Market cannot put together two consecutive plus days, and
it’s hard to break losing streaks when you can’t put winning ones
together. Who knows what FedSpeak next week will bring, but for now,
still can’t advise floating for any length of time.” -Ted Rood, Senior Originator, Wintrust Mortgage
“Wow, what a volatile week, and what an incredible amount of power Jon
Hilsenrath of the WSJ has on rate markets. He’s the journalist who’s
believed to be the Fed’s mouthpiece, and he wrote a story yesterday
saying that investors second-guessing the Fed’s commitment to low rates
is “exactly what the Fed doesn’t want.” Rates dropped on a bond rally
after this story. It created a nice dip from yesterday until halfway
through today. I stick with my stance of “lock the dips because they
don’t last” and this dip is no exception. Most of the gains we’ve seen
have reversed today.” –Julian Hebron, Branch Manager, RPM Mortgage
“Locking is never risky in my book and I don’t see anything drastically
improving until after the FOMC next week if at all. Best princing in 2
weeks I believe, so take it.” Mike Owens, Partner, Horizon Financial Inc.
Today’s Best-Execution Rates
- 30YR FIXED – 4.0 – 4.125%
- FHA/VA – 3.75%
- 15 YEAR FIXED – 3.25 – 3.375%
- 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 challenged the long term trend higher, but failed to sustain a breakout
- EU and domestic economic data remain relevant to mortgage rates, but uncertainty over the Fed’s bond-buying plans through the rest of the year is causing volatility
- The further we’ve progressed into 2013, the faster the swings have become
- Fears about the Fed’s bond-buying intentions were proven well-founded on May 22nd when rates rose to 1yr highs after the Fed confirmed their intention to taper bond buying programs sooner vs later
- Just as the pendulum pushed far to the positive side of the rate range in April, the opposite swing occurred in May (now the worst single month for rates on record since 2008)
- (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).