Mortgage Rates rose again today, this time at a slightly faster pace than yesterday’s moderate increase. All of the market movement responsible for the increase in rates was seen in the overnight session, during European and Asian market hours, whereas the domestic hours were relatively uneventful.
Yesterday we mentioned that the recent weakness looked more like a ‘leveling off’ from last Thursday’s market levels and despite the incremental weakness in rates markets, today’s movement is still mostly consistent with that view. That said, if rates continue to worsen tomorrow, at the very least, it will significantly widen the scope of what “leveling off” could mean.
Here’s why… For now, ‘leveling off’ simply means the the borrowing costs associated with prevailing Best-Execution rates are getting slightly higher but Best-Ex rates themselves are staying the same, currently at 3.75% for 30yr Fixed Conventional loans.
(Read More: What is A Best-Execution Mortgage Rate? )
We could also look at this phenomenon in terms of 10yr yields (although we’d be careful to note that 10yr yields do not govern mortgage rates, but are useful in terms of assessing broader trends in the overall bond market). 10’s have recently been trading under the long-term floor at 1.80%. Today’s weakness brought them back up to that level, but this time it acted as a ceiling. This just gives us another line in the sand to consider whether or not things are “leveling off” or actually shifting for the worse.
Now that we’ve explained all that, we’d recommend forgetting it, or at least not trying to predict what’s going to happen and acting on those predictions. There are two reasons for this. First, there’s a high degree of uncertainty about market levels and market movements right now. While we can generally agree that events in Europe SHOULD keep those movements relatively muted, even the smartest people in the room can’t know for sure. It’s increasingly the case that market participants are setting their goals for smaller gains and closer time intervals. There are less big, long-term bets being placed on where rates will go.
More specifically, economic data this week is limited, leaving interest rates more tuned in to European events and the stock market. A relatively important meeting of European leaders is set for tomorrow to discuss options in handling the recent threats of destabilization from the upcoming Greek elections in June. In other words: tomorrow is one of those “high risk events,” even if it’s not the highest risk event on the near term horizon.
Beyond all that, while costs may have risen, best-ex rates are still at historical lows, and indeed we’re blue in the face from all the discourse we’ve shared on what that implies (i.e. harder for rates to move lower from here- as we’ve just seen since Friday, diminishing returns for increased risk, etc..)
Loan Originator Perspective With Rates At All Time Lows
Jason York, Vice President of VA Operations at Prime Mortgage Lending, Inc
We are currently still in the same boat as we have been recently, but if you have loans that you haven’t locked yet, then it might be better to float for a little bit to see where we head. We were at the peak, so there wasn’t much higher we could go. There had to be at least some pull back. You can’t make the same mistake that some people made about housing prices! They can’t go up forever!
Mike Owens, Partner with HorizonFinancial, Inc.
Definitely in lock mode. Rates are just too good to play with fire. Way too much risk to float in my book.
Aaron Meyer, First Bank Financial Centre
My clients are locking their mortgage rate because we have seen the 10 Year bounce at 1.80, stocks have had 2 consecutive green days along with positive housing numbers this morning.
Brett Boyke, Senior Mortgage Banker, Wintrust Mortgage
This mini selloff from last weeks huge move lower is not a surprise. It is not healthy for rates long term to move so far so fast.
Julian Hebron Branch Manager, Loan Agent, RPM Mortgage
Even though U.S. economic fundamentals have been a bit weaker lately it appears that near-term bearish technicals are causing upward rate pressure. This could last a couple weeks, then likely reverse (or at least remain even) based on perception of what is happening in the Eurozone. In other words, a repeat of what I said yesterday: if you’ve got a strong stomach, you can hold for rates to be slightly better. Otherwise, it’s hard to advise against capturing current record lows.
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).