Mortgage rates held steady on Wednesday despite slightly weaker levels in the underlying secondary mortgage market. Prices of the mortgage-backed securities that most directly affect mortgage rates have held inside very narrow ranges so far this week, building the sense that markets are waiting for guidance from Friday’s major employment data. However, more and more lenders are making lower interest rates (sub 3.25%) available on their rate sheets at a premium.
If additional lenders open up sub 3.25% rates availability, that market could become competitive enough to make logical sense from a RATE vs COST standpoint. Until then Best-Execution is still 3.25% and the borrowing costs associated with that rate are very close to last week’s all-time lows.
Friday’s Employment Situation Report continues to be a hot topic for rates markets. The Fed’s recent announcement that they would buy additional mortgage-backed-securities is the driving force behind the rates rally, and was predicated largely on a lack of traction in labor markets. Because the program is open-ended, the sooner labor markets show signs of life, the sooner traders will expect the Fed’s easing measures to subside. Thus, if Friday’s report indicates stronger-than-expected job creation, rates could rise quickly despite the recent stability near 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
“Today’s MBS price decline isn’t extreme and rates are still near record
lows, but with a sharp MBS up-trend in recent weeks that’s been driving
rates to even lower records, consumers searching for the rate bottom
shouldn’t get complacent. If Friday’s BLS jobs report is an upside
surprise, rates are likely to jump up. ” –Julian Hebron, Branch Manager, Loan Agent, RPM Mortgage.
“Friday’s non farm payrolls report would ordinarily be a market mover,
but with the Fed buying MBS like sailors spending money on shore leave,
this month’s report may not influence rates as much as usual. My
clients are asking where the bottom is on this market. I tell them
we’ll know after it’s come and gone, but not before, even with the
assistance of Mortgage News Daily!” -Ted Rood, Senior Originator, Bank Star
“It is always somewhat risky before the NFP, but I don’t see a big
surprise that will really hurt us. The main focus of questions is as
always, “are rates going lower and why is it taking so long to close?”
The answer lately is yes and since everyone is refinancing it is taking
longer than usual. I always have a float down / renegotiation option
to fall back on with locked loans. Floating has not been risky lately
so it’s not a bad idea at this time.” –Mike Owens, Partner with HorizonFinancial, Inc.
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).