Mortgage Rates at a Tipping Point After Rising Today

Interest Rates

Mortgages Rates moved higher today at the quickest pace of the week.  For the second time this year, the 3.875% Best-Execution rate on 30yr Fixed Conventional loans is in question.  If rates move much higher from here, the average Best-Execution rate across multiple lenders will have risen back to 4.0% and for quite a few lenders, is already there.  (We explain more about Best-Execution calculations in THIS POST).

Today got started off on a sour note for rates with the late night news that Greece was very close to finalizing the terms of their most recent bailout.  This isn’t some surprising game-changer, but has done enough damage to bond markets, which tend to offer lower interest rates in times of economic uncertainty.  As a successful bailout relieves some uncertainty, rates generally moved higher, including mortgage rates.  

Several European officials gave their various points of view on what the bailout negotiations meant and what they did not mean over the course of the day, and this caused a decent amount of volatility, which never really subsided.  Although bond markets are currently no worse off than where they started the morning, MBS, the “mortgage-backed-securities” that are most directly responsible for your mortgage rates, don’t perform as well when things are volatile.  

Tonight is another one of those “high-risk events” that we sometimes discuss.  But this time, it’s not high risk due to an actual EVENT, but rather due to the general ENVIRONMENT.  What’s at risk is that, at current levels, mortgage rates are somewhat susceptible to experiencing a drift away from the 3.875% Best-Execution that has prevailed for most of the year.  This means that tomorrow’s trading direction is very important.  If bond market yields are generally falling, then rates will probably ease back down comfortably into 3.875% across the board, but if rates are rising tomorrow, opportunities for current best-ex rates could begin evaporating fairly quickly.  


  • 30YR FIXED –  3.875% – 4.0%
  • 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

  • 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).

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