Mortgage rates surged lower again today, continuing an ongoing push into lower all-time lows. Although bond markets in general moved lower in rate today, the overriding factor leading mortgage rates lower is the ongoing reaction to the Fed’s recently announced quantitative easing measures which specifically target the securities that underlie the mortgage market.
Yesterday’s rate sheets were strong enough that we noted 3.25% as the more prevalent Best-Execution rate among most lenders. Today’s moves confirm it. While we’re sympathetic to concerns that rates haven’t fallen “fast enough” given the unprecedented stimulus measures as well as the movement in the secondary mortgage market, we can say that we’ve never seen rates move lower this quickly from all-time lows to “even lower all-time lows.“
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. For now, the trend is supportive and positive for rates, but we’re watching it closely for the same sort of paradoxical responses that occurred in 2010. Things look different this time around, but a lot of that has to do with Europe. 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
“Lenders were generous overnight. My rate sheets today were the best
ever. Float until you are within 15 days of funding. But nothing
wrong with locking right now as it is always better to lock when you
should have floated then to float when you should have locked.” –Victor Burek, Benchmark Mortgage
“With rates at all time lows (again), and all trends pointing down, I’m
looking at more of a float bias IF clients fully understand the
possibility of losing lender paid closing costs (most likely) or their
rates worsening slightly should the trend reverse. Bottom line, in 12
years I have never dreamed of writing loans anywhere near this pricing.
If you haven’t checked with your favorite loan officer, do yourself a
favor and call him/her today!” –Ted Rood, Senior Originator, Bank Star
“What are you waiting for, 2.875%?? Grab a rate now, then grab
(MAYBE) a lower rate in 6 months. You can, at least, take the maybe
out of the equation if you take advantage now.” –Bob Van Gilder, Finance One Mortgage
Today’s Best-Execution Rates
- 30YR FIXED – 3.25%
- 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).