After improving yesterday, Mortgages Rates moved higher today, falling roughly in line with mid-week offerings depending on the lender. The weakness was abrupt, arriving late in the day, but was not scarcely enough to affect the current Best-Execution 30yr Fixed Conventional Rate of 4.0%. That means the weakness was seen in the form of slightly higher closing costs. Buydowns to 3.875% remain too steep to make sense for most borrowers, and would need to get closer to the buydown that currently exists from 4.125% to 4.0% in order to vie for the Best-Execution title. That said, some lenders would be able to structure scenarios lower than 4.0%.
(read more about Best-Execution calculations).
Today’s market movements essentially played out according to the concerns we raised yesterday. This doesn’t always happen, and we don’t normally lean too far in one direction or another, but yesterday we did, and it helps tell the story of how things happened today. Here’s what we said:
We’re more concerned about the momentum of the recent improvement in rates being able to continue after today’s trading than we were yesterday. This might seem odd given the fact that rates held steady yesterday but improved today, but underlying levels in bond markets failed to break convincingly into the stronger territory they’d been in before their major movements on 3/13 and 3/14.
Of all the days this week, we see tomorrow as the most dependent on the scheduled economic data to help bond markets decide whether or not they’re out of steam following this much-needed correction from weaker mid-month levels. If they are indeed out of steam, that will likely not help mortgage rates tomorrow. Based on the fact that we’ve recovered quite a bit of lost ground over the past two weeks and that a negative day tomorrow could mark a temporary shift in momentum, today stands out as a safe opportunity to recapture some of those losses. In other words, if you’d been floating over the past two weeks, waiting for things to come back, we’re at levels where it’s starting to make more sense to lock in those gains without hoping for more.
This “running out of steam” is essentially what happened. Bond markets tried to eke out a few more gains, and were even able to do so in the morning trading, but the afternoon saw widespread instance of “giving up” those goals of further improvement. That retreat led to a fairly abrupt worsening of levels in MBS (the Mortgage-Backed Securities that most directly influence mortgage rates), and most lenders recalled rate sheets to put out slightly higher versions.
Next week brings the important Employment Situation Report on Friday. Even before then, market moving data and events dot the calendar right from the beginning of the week. In a vacuum of economic data and events, rates would continue to get worse next week. Betting on lower rates is to hope that the data turns out to be economically worse-than-expected or that a news headline rattles market confidence and drives better demand for fixed income investments like MBS. Ultimately, Friday’s Jobs Report is the “biggie,” and will serve to either accelerate or undo some of the progress or deterioration created in the first four days of the week.
Today’s BEST-EXECUTION Rates
- 30YR FIXED – 4.0%
- FHA/VA -3.75%
- 15 YEAR FIXED – 3.25%-3.375%
- 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
- We’re currently further away from the very best levels than we have been in recent months
- We’ve broken away from a long, stable trend and are expecting greater volatility
- Rates could easily move higher or lower, but given the above facts, there seems to be more risk than reward regarding floating
- (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).