rates continued to inch lower on average after rising to the highest levels since September at the end of last week. There were no significant market moving events behind the move, but rather, rates markets are simply consolidating after last week’s fast-paced changes. Those changes brought the Best-Execution rate for 30yr Fixed, Conventional loans to 3.5%, and for most lenders, that’s where it remains, though the borrowing costs associated with that rate mostly moved lower today. Additionally, many lenders are close to a 3.375% Best-Execution rate, and most are still able to offer lower if you choose to “buy down” the rate (paying extra up front costs for a lower rate).
Rates may have improved from recent highs, but we’re still quite a bit higher than the fairly docile ranges of November and December. Depending on how you look at it, this could be an opportunity or a sign of worse things to come. During the recent relatively calmer, lower-rate trend, there had been little incentive to float quite simply because rates didn’t have much room to get lower. While Best-Execution is still historically from a long term perspective, the recent move higher means that the potential gains from floating are no longer so small as to not be considered. That said, if you can’t afford to lose any ground, don’t risk it. The other side of the coin is that markets have changes from being mostly flat to finally being “in motion.” The past 2 days could still turn out to be the eye of a storm that continues carrying rates higher.
Loan Originator Perspectives
“Sleepy day for rates today, as we continue to define the new range as discussed yesterday. We picked up a little ground, but for me the best news is that we’ve confined last week’s losses. Still have to be mindful NOT to take the market for granted, but I don’t anticipate any major movements (either way) until our next crisis d’jour.” –Ted Rood, Senior Originator, Wintrust Mortgage.
“Since being blindsided with the FOMC minutes, mortgage rates have slowly but steadily improved. The benchmark 10yr is up against solid resistance at 1.87. If the 10yr can break that, we should mortgage rates follow and improve which makes tomorrows 10 year auction rather important. I favor floating overnight but be prepared to lock tomorrow if the auction is met with lack luster demand.” –Victor Burek, Open Mortgage.
“Happy New Year! Mortgage rates remain in a narrow range. I am seeing best execution at 3.5% on a 30 yr fixed. APR 3.535 We have the 10 year Treasury auction tomorrow. Keep in touch with your Originator…could be a market mover, and take advantage of the Govt. “cheese” program (aka— low rates).” –Bob Van Gilder, Finance One Mortgage
Today’s Best-Execution Rates
- 30YR FIXED – 3.375 – 3.5%
- FHA/VA – 3.25% (varies more between lenders than conventional 30yr
- 15 YEAR FIXED – 2.875% – 2.75%
- 5 YEAR ARMS – 2.625-3.25% depending on the lender
Ongoing Lock/Float Considerations
- Rates have risen moderately from their all-time lows, making for relatively increased reward for floating at the expense of greater risks of loss.
- Rates could easily move higher or lower, and unscheduled, unexpected events can ultimately have the most say in the direction.
- Near term risks in 2013 include the upcoming debt-ceiling debate in Washington as well as the Fed’s policy outlook regarding securities purchases.
- (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).