Mortgages Rates held steady over the weekend. In fact, rates were so steady that our measured averages on Friday were the same as today’s reading, which is a fairly uncommon occurrence. Friday had been a fairly stable day, and markets traded in better territory than Thursday. Rates had come under pressure recently, pushing the 30yr Fixed Best-Execution rate up to 4.0% in some cases, with Friday and now today offering some moderation back into the 3.875% range. (We explain even more about Best-Execution calculations in THIS POST).
News and events surrounding the current Greek bailout negotiations continue to drive markets, and it is perhaps the relative lull in those events that has bond markets and MBS (the “mortgage-backed securities” that most directly govern mortgage rates) trading near Friday’s levels, thus resulting in a little-changed rate sheet environment among lenders.
Granted, some developments in Greece seem like they should be important. For instance, last week’s meeting of Euro-zone finance ministers to vote on approving the Greek bailout was postponed due to Greece’s inability to get all their political leaders to sign off on the required austerity reforms. Then yesterday, news came out that Greece had approved those same austerity reforms, ostensibly meaning that the bailout could now go ahead. While bond markets did open up weaker as a result of this, they soon corrected back to nearly unchanged levels as they considered that there would be no definitive news until Wednesday on whether or not the bailout will be approved.
Why all the fuss about Greece? In a roundabout way, the turmoil in Europe is a major contributing factor to our current interest rate environment. While some believe that Europe can slowly and steadily build toward economic sustainability, others believe it’s only a matter of time before one Euro-zone country officially defaults, sending shockwaves through the rest of the Euro-zone and potentially catalyzing further defaults. Needless to say, this creates a lot of economic uncertainty, and a great deal of uncertainty for investors who are looking for a safe place to park their money.
One of the safest places has been in good old USA Fixed-Income investments such as Treasuries and less-directly, MBS. So when it looks like Greece is on the verge of getting a new bailout approved, that eases the uncertainty over Europe’s debt issues and can pressure US interest rates higher. The fact that you’re not seeing this occur in grand fashion has a lot to do with the fact that this one announcement, in and of itself, will not make or break the current low interest rate environment, and more than a little to do with the fact that we’ve been in a similar position with impending announcements concerning Greece only to meet with some sort of delay or alteration of the plan altogether.
So markets are skeptical and for good reason. Still, if things go smoother than expected in Europe between now and Wednesday evening, we could feel the effects in mortgage rates. We’ll also get a relatively important piece of domestic economic data tomorrow in the form of the Retail Sales report. If that is showing ongoing improvements in the domestic economy in addition to potentially positive economic news out of Europe, rates will likely move higher.
The biggest question is and will be: what exactly would constitute “positive economic news” out of Europe? That question can only really be answered based on how markets respond to whatever news they receive. Between now and then, the only sure thing is to consider that Best-Execution rates are in a range of their lowest levels in history and continue to face resistance to moving lower from one place or another. We’re not saying that rates can’t move lower or won’t, simply that they’re as low as they’ve been and have had a hard time moving much lower.
Today’s BEST-EXECUTION Rates
- 30YR FIXED – 3.875%
- FHA/VA -3.75%
- 15 YEAR FIXED – 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
- There are technical reasons for that as well as fundamental reasons
- Lenders tend to get busier when rates are in this “high 3’s” level and can throttle their inbound volume by raising rates or costs.
- While we don’t necessarily think rates are destined to go higher, given the above facts, there seems to be more risk than reward regarding floating
- But that will always be the case when rates operating near historic lows
- (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).