Mortgage rates continued higher on Tuesday, rising at a faster pace than Monday, and reversing two days of improvements at the end of last week. The change in rates versus yesterday had little to do with any market events during domestic hours. Rather, bond markets simply began the day in weaker territory and trading in the secondary mortgage market sustained those weaker levels throughout the day.
While this has kept us relatively insulated from mid-day price changes, the outright weaker levels in the morning resulted in Best-Execution rates for 30yr Fixed Conventional Loans inching back up to 3.375%. Several lenders are still priced well enough for 3.25% to be a viable option depending on the scenario whereas others are well into 3.375% and would soon be approaching 3.5% if the weakness continues.
Whether or not the weakness continues may not be able to be decided until the end of the week. We’d wondered aloud on Monday whether or not we’d see any major motivation for markets this week in terms of the scheduled economic data and so far, things have been fairly apathetic in that regard. We’re leaning toward Thursday being an important point in either confirming that apathy or in showing us that markets were actually just trading cautiously ahead of the EU Summit (semi-annual meeting of European officials to discuss ongoing debt crisis, and which occasionally serve as the stage for important market headlines).
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. 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
“Applications are steady, but 3.25% with no costs is not quite available everywhere.
That seems to be what everyone wants. A lot of my clients are
refinancing for the second or even third time in a short period of time
so no cost seems to be the flavor of the month. Makes sense too, but
there is still a benefit at 3.375% or 3.5%. Holding out for 3.25%
might not work, but then again………. ” -Mike Owens, Partner with Horizon Financial, Inc.
Today’s Best-Execution Rates
- 30YR FIXED – 3.375%
- FHA/VA – 3.25% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED – 2.75% – 2.875%
- 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).