Mortgages rates held steady for the most part today, despite relatively volatile movements in underlying markets. Actually, the bond markets of which mortgage rates are a part, were not nearly as volatile as stock markets, although both sides were keen to react to European headlines more so than today’s anticipated event, the 10yr Treasury Auction.
The moderate amount of movement left most lenders very close to yesterday’s offerings. Best-Execution for 30yr Fixed Conventional Loans remains at 3.875% with some lenders slightly increasing the borrowing costs at that right while many others had slightly decreased costs. The net effect left our computed average unchanged day-over-day.
Speaking of that average, at 3.88%, it’s the lowest it’s been in quite some time. In fact, if you’re simply looking at the 3.875% and above, rates are right in line with the all-time best offerings. The only thing holding the average back from it’s previously achieved 3.81% best, is the fact that rates of 3.75% and below are more expensive than they were the last time they were available.
It has been and may continue to be the case that there’s less “love” for those “3.75% and lower” rates due to the structure of the Mortgage-Backed-Securities (MBS) market that underlies the world of mortgage rates. We’ve been talking about this more and more in recent days and can certainly appreciate that it’s a complex topic in the scope of a daily interest rate update. But it’s really the only accurate way to account for the recent phenomenon of being “stuck at a 3.875% Best-Execution.”
Without revisiting the more esoteric points of recent discussions (and please let us know if you need/want more explanation on anything you read here), suffice it to say that 3.875% is the lowest rate that fits into the most popular MBS bucket (more on buckets HERE). The next bucket lower is, by comparison, scary, untested, unproven, dangerous, unknown, and risky as far as investors are concerned. Just like you pay more for limited-edition-type items, it’s more expensive to get a mortgage that’s produced in lower quantities.
But rates are basically in a place now where any further market improvements will cause a very slow trickle of increased availability in that “frontier zone” of the underlying MBS market. Given that today’s strength seems to draw more on European debt concerns, we’re thinking investors will want to see more organic (and domestic) causes for concern before getting too comfortable with the current level of interest rates.
Tomorrow could be useful to that end. It contains the week’s highest concentration of moderate to potent economic data as well as the week’s final Treasury coupon auction in the afternoon. We’re not expecting rates to shoot abruptly higher without significant motivation from Europe, but neither are we expecting them to have an easy time getting lower in the short term.
Today’s BEST-EXECUTION Rates
- 30YR FIXED – 3.875%
- FHA/VA -3.75%
- 15 YEAR FIXED – 3.125-3.25%
- 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).