Mortgage Rates improved again today as domestic economic data joined with ongoing fear of a European currency collapse to send US Treasury yields well into new all time lows. Mortgage rates duplicated that feat, but not nearly as convincingly. After being stuck in the mud for months at 3.875%, the mortgage rate levy broke, giving way to 3.75% recently. With today’s gains, some lenders are at a 3.625% Best-Execution rate for 30yr Fixed Conventional Loans.
(Read More: What is A Best-Execution Mortgage Rate? )
(Get Caught Up With: Yesterday’s Post)
Although the market continues to be primarily driven by Europe, today saw the addition of slightly negative domestic economic data contribute to an incrementally gloomier outlook for the global economy. Investors are scared and the common quip being tossed around to justify the progressively lower bond yields is that they want “return OF capital as opposed to return ON capital.”
The whole phenomenon produces an environment that benefits Treasuries much more than mortgage rates, something we’ve discussed in greater detail in the past (read more: HERE). Even so, mortgage rates were able to eke out new all-time lows today.
Tomorrow brings the most important piece of monthly economic data: The Employment Situation Report. This is always a potential market mover, regardless of the European consideration. That said, if the report is strong, which would normally cause rates to rise quickly, those effects could certainly be muted due to ongoing concerns over Europe. Nevertheless, rates are at all-time lows the day before the big Jobs report. That’s one of the “lockiest” situations we can think of historically, even if we don’t have any reason to believe rates have bottomed out definitively.
Ongoing Guidance: We’d continue to advocate not trying to “get ahead” of current market movements as a high degree of uncertainty is pervasive. While it’s a reasonably safe assumption that European concerns will generally help rates stay lower than they otherwise would be, that “otherwise would be” part is very much a moving target. Best bet is to focus on the fact that rates are at their all time lows, and with very close to their all-time low borrowing costs. Add in the fact that progress has always been increasingly difficult from current levels and risk vs reward for floating vs locking looks a bit larger than we’d like, but not out of the question for those who understand the risks and have an exit strategy if things don’t go their way.
Loan Originator Perspective With Rates At All Time Lows
Constantine Floropoulos, VP, Quontic Bank
It is irrational not to lock prior to the NFP report. It is one of, if not the biggest market mover for us rate watchers. At all time lows in a rally, you need to book your profit and move along. Just like in the stock market, sell the rips buy the dips….today would be a a day to take your profits. Can rates go lower? Sure, but why risk it at these levels….the old trying to catch a falling knife saying comes to mind here. Don’t be greedy, pigs get fat, hogs get slaughtered…
Victor Burek Mortgage Planner, Benchmark Mortgage
Big rally today, but lenders held onto most of the gains. At current mbs price, rates should be better but lenders are very reluctant to pass along the gains due to volume of business they currently have. That said, today’s rate sheets are the best i have ever seen.
Bob Van Gilder, Originator, FinanceOne
Fresh lows on 10 yr Treasury and Highs on 3.5 mbs coupon—-rates are good. Period. If you are on the fence, get off. The jobs report (NFP) tomorrow has been known to upset to the upside (rates higher). If you lock-please have your originator lock for minimum 45 days on refinances. As Lender volume increases, the incremental cost of a 45 day lock is worth the peace of mind. (should rates rise during processing—you could run outta time and miss the proverbial “Boat”)
Ted Rood, Senior Mortgage Consultant, Wintrust Mortgage
90% of a lot is better than 100% of nothing! Reminded of this adage today when a client wanted to keep his 5.25% loan “for now” rather than drop to 3.75% “because he heard rates might drop more.” Guess it’s possible, but when rates are already at unprecedented levels, statistics say it’s more likely they’ll go up than down. Fundamentals are still Europe’s foundering economies, and won’t change anytime soon, but opting to keep a high rate in case rates drop even further means continuing to waste money in the meantime.
Julian Hebron, Branch Manager, Loan Agent, RPM Mortgage
My theme continues: lock these lows if you have low tolerance for volatility. Otherwise if you want to try to squeak .125% lower, eurozone problems now and U.S. fiscal problems becoming a bigger deal this summer could provide that opportunity at very brief trading intervals. If you expect to capture anything lower, you must be pre-approved (meaning all your documentation is submitted to your lender) and your loan agent must have a standing order to lock at your pre-determined target.
Dirk Postupack, Loan Officer, Allentown Mortgage Corp
For the first time in a long time, I am not opposed to floating through this report. Even if we get a better than expected NFP, I believe that there is a lot of room for current pricing to hold its ground, and that a better-than-expected NFP report won’t hurt rates as much as it normally would. Personally, I think tomorrows NFP does not hit expectations.
Brett Boyke, Senior Mortgage Banker, Wintrust Mortgage
I feel like we are at the top of one of those giant drop amusement park rides. I feel like rates will drop at any second, but we are still stuck at the top with a very uneasy feeling of anticipation. For all we know the overly sunburned carnie is taking a nap and forgot about us….
Brent Borcherding, Loan Officer, Capital M Lending
I commented yesterday that there is the potential lower rates ahead, and I still believe that to be true. However, most of the Pros in our business have seen a similar event to this before (multiple times) and I suggest they will tell you that if you are looking to close in the next 30 days to lock, and I agree. Lenders will be swamped with new locks, meaning new business, and are not likely to pass along any improvements. Additionally, this has been a very nice rally that is likely to back up, slightly higher rates, before we continue lower.
Today’s BEST-EXECUTION Rates
- 30YR FIXED – 3.75%
- FHA/VA -3.75%
- 15 YEAR FIXED – 3.125 edging down to 3.00%
- 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
- Rates could easily move higher or lower, but given the nearness to all time lows, there’s generally more risk than reward regarding floating
- But that 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).