Mortgage Rates rose slightly to begin the week after hitting new all-time lows last Friday. Today’s rates weren’t much worse, and Best-Execution remains at 3.625%, but several lenders recalled rate sheets for negative adjustments due to late-day weakness in secondary mortgage market trading. It’s too soon and there is too much ahead on the calendar to draw any conclusions about additional momentum from here.
(Read More:What is A Best-Execution Mortgage Rate?)
News and data was notably uninspiring for markets today. Bonds such as Treasuries and Mortgage-Backed-Securities (MBS, the most direct influence on lenders’ rates) marched to the beat of their own drummers especially. Markets can trade news, data, and “other.” Today was one of those “other” days where some of the movement was purely a correction to an incredible rally last week. Additionally, the all-time-low mortgage rate environment also indirectly weighs on the ability of rates to go lower. But why?
Think of this in terms of supply and demand. As rates go lower, demand increases. The more loans that are locked, the more funding has to be obtained for those loans. Lenders accomplish this by pre-emptively committing to sell securities backed by the groups of new mortgages that they expect to have in the next 1-3 months based on the amount of locks they’re currently receiving. The more of these MBS they have to sell, the more that supply can overwhelm the amount of willing investors in the marketplace. So sellers have to lower their prices in order to get funding, and lower prices on a mortgage-backed-security results in higher rates. Essentially, we’re simply seeing a balancing out of a supply/demand equation. We’re reading into today’s movements as anything indicative of a broader shift–more like a course correction.
Ongoing Guidance: We’d continue to advocate not trying to “get ahead” of current market movements as a high degree of uncertainty is pervasive. While it’s a reasonably safe assumption that European concerns will generally help rates stay lower than they otherwise would be, that “otherwise would be” part is very much a moving target. Best bet is to focus on the fact that rates are at their all time lows, and can change quickly based on events that aren’t “scheduled” or able to be forecast. Risk vs reward for floating vs locking looks a bit larger than we’d like, but not out of the question for those who understand the risks and have an exit strategy if things don’t go their way.
Loan Originator Perspective With Rates At All Time Lows
Jason York, Vice President of VA Operations at Prime Mortgage Lending, Inc
If you are still good with pricing where it is, then there is no shame in locking your 30 day out files, even some 45 days out files. This is when I stress to my clients how important it is to get their docs in. I won’t lock in a rate until I have a clients docs ready to submit, because that is when the clock starts ticking.
Ted Rood, Senior Mortgage Consultant, Wintrust Mortgage
Economic news from US and Europe continues to disappoint, don’t see rates rising much soon. Doubt we’ll see them drop much either, so limited benefit to floating now, and certainly no benefit for waiting to start a loan. The new FHA streamline program is boosting loan volumes dramatically, so turn times will increase and lenders may cut pricing to slow submissions.
Kent Mikkola #353976, Mortgage Consultant, M M Mortgage, LLC #213677
2nd best day EVER! Take it!
Jeff Statz, Mortgage Advisor, Network Funding, L.P.
Aside from Lock/Float advice, if you do not yet have an application in with your lender, you’re running behind. This volatility can become “Catch the Falling Knife” very quickly.
Mike Owens, Partner with HorizonFinancial, Inc.
I’m locking and renegotiating rate locks with secondary as I go. Lock while it’s great and negotiate later as available. I’ve been relocking at better rates already.
Today’s BEST-EXECUTION Rates
- 30YR FIXED – 3.75%
- FHA/VA -3.75%
- 15 YEAR FIXED – 3.125 edging down to 3.00%
- 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
- Rates could easily move higher or lower, but given the nearness to all time lows, there’s generally more risk than reward regarding floating
- But that 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).