Mortgage rates finally broke their unprecedented winning streak on Thursday as rates moved higher for the first time since the Fed announced it’s third round of quantitative easing on September 14th. The 10 straight sessions of improving rates crossed into new all-time low territory earlier this week, and even after today’s weakness, it’s still the 3rd best day in the history of mortgage rates. Best execution levels continue hovering firmly at 3.25% for 30yr Fixed Conventional Loans.
Economic data had little effect on trading levels in the underlying markets today. Treasuries and MBS (the mortgage-backed securities that most directly influence lenders’ rates) both weakened and stocks advanced on statements from Spain regarding their plans to reign in spending and increase revenues. Although this is technically the same wash/rinse/repeat cycle of a European country promising reforms, markets paid some attention (which is also part of the same cycle) as it potentially eases fears regarding the Euro zone collapse and increases demand for risk-based assets like stocks.
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
“Lenders really took a lot away in pricing this morning. Since i am not a
fan of locking on Fridays, i would say if you float through tonight,
you are floating til Monday. But i do favor floating. ” –Victor Burek, Benchmark Mortgage
“The movement upward in rates today versus yesterday was pretty dramatic.
The lesson to be learned here is you have to be on the same page with
your loan originator and have a target set in advance that can be
executed on if hit. The market moves way to fast for the ol’ let me
check with the wife and get back to you in 2 days.” –Brett Boyke, Senior Mortgage Banker, Winstar Mortgage
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).