Mortgages Rates are somewhat improved today after holding relatively steady to begin the week. In the underlying markets MBS (the “mortgage-backed-securities” that most directly influence mortgage rates) rose to their best levels since last Thursday after today’s Retail Sales figures showed slower than expected consumer spending. When MBS prices rise, interest rates fall (although it should be noted this isn’t always a linear or immediate relationship, but it is generally true over time). Today’s improvements bring rates near the more aggressive end of 3.875% Best-Execution levels in terms of borrowing costs, and some lenders are aggressively priced at 3.75% for pristine scenarios and higher loan amounts. (We explain even more about Best-Execution calculations in THIS POST).
European headlines, especially those concerning the current iteration of Greece’s proposed bailout, have been a frequent topic of conversation with respect to mortgage rate movements lately. That continues to be the case this week and today. Markets have been anticipating a second meeting of European finance ministers, scheduled to take place on Wednesday, in order to vote on the Greek bailout. Such a vote was delayed last week, but made possible on Sunday after Greek party leaders voted to approve the austerity package that had been holding up the process, or so we thought!
Now today, there are reports out of one Greek party leader having NOT yet provided a commitment to Greece’s lenders–something that other party leaders have provided. This is apparently a separate process from the one undertaken to “approve the austerity package” on Sunday, and today, has caused the meeting that was scheduled for tomorrow to become a “conference call instead.” It’s all a bit dramatic and a bit complicated, but this is one of the factors helping MBS to better levels this afternoon as the rampant indecision and equivocation surrounding the Greece situation counteracts some of the anticipation that had been hurting bond markets yesterday morning.
We should mention that this political backtracking in Greece is not directly influencing MBS markets. MBS improvements have more to do with “keeping pace” with broader bond markets which generally perform better when global economic uncertainty ramps up, as it logically does when a Eurozone country looks that much closer to defaulting. Long story short, if Greece were to receive the current bailout funds without a hitch, the demand for US Treasuries would probably subside to some extent. They’re currently being treated as a safe-haven, guarding against uncertainty in the Euro-zone. A successful bailout would ease some of that uncertainty. Treasury prices would probably fall a bit as demand declined, and MBS would follow suit to some extent, resulting in marginally higher mortgage rates. This has been the most prevalent chain of cause and effect between economic events and mortgage rates for many months now.
All that having been said, no one truly knows what to expect with tomorrow’s conference call, nor could we do anything but guess as to how much of a particular outcome is already priced in by markets. That being the case, we’d treat it as a moderately risky event. In terms of the average range of rate movement we see on any given day, tomorrow’s meeting–even though it’s only a conference call–has the potential to widen that range for the better or worse. We’d weight that against the fact that today’s improvements brings rates that much closer to all time lows in terms of borrowing costs, and of course maintains the ongoing all-time low Best-Execution rate of 3.875%
Today’s BEST-EXECUTION Rates
- 30YR FIXED – 3.875%, glimpses of 3.75%
- FHA/VA -3.75%
- 15 YEAR FIXED – 3.25%, glimpses of 3.125%
- 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
- 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).