Mortgages Rates were sharply higher yesterday, but have recovered a significant portion of those losses today. The most noticeable movement was actually over the two day period since Tuesday’s fairly strong rate sheets. Things began to deteriorate moderately with Wednesday’s rate sheets and worsened even more yesterday.
Today’s recovery gets rates back to Wednesday’s levels in most cases while Tuesday remains noticeably better. Even so, it means that 4.0% did not get confirmation as taking over as the predominant Best-Execution rate for 30yr Fixed Conventional loans. One important thing to keep in mind in reading this website is that we’re most frequently speaking about interest rate movement in terms of COSTS as opposed to the rates themselves.
While there are more than 2 components that determine how interest rates change each day, the two that allow us to most objectively track the changes are RATE and COST. The rate component refers to the actual interest rate that would appear on a borrower’s Good-Faith-Estimate, or more officially, the Note.
The cost component refers to the portion of the closing costs that a borrower would have to pay in order to secure that rate. In cases of no origination/no point scenarios where the lender is paying for a portion of 3rd party closing costs, it would conversely allow the lender to pay a greater portion of those third party closing costs.
The bottom line is this: in situations where we say “rates moved higher,” if the actual interest rate is unchanged, it means that it’s getting more expensive to execute that loan, either because you’ll have to pay more closing costs, or because fewer closing costs will be credited by the lender. (We can devote more time to discussing this in the future. Please let me know if that would be helpful or if you have specific questions on the topic).
Additional reading: Previous post with more detailed discussion about Best-Execution calculations.
Today’s BEST-EXECUTION Rates
- 30YR FIXED – 4.0% with 3.875% making a comeback
- 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
- 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).