After experiencing a rare 3rd day in a row of neutrality or positivity, Mortgage Rates
pulled back up a bit today. In most cases, this won’t affect the generally prevailing 4.0% Best-Execution rate and instead simply cause an increase to closing costs for whatever rate you were quoted yesterday. Despite the rise in rates, today still looks like a good locking opportunity in the context of recent rate offerings.
Today’s BEST-EXECUTION Rates
- 30YR FIXED – 4.0%, Some 4.125%, Very few 3.875%’s
- FHA/VA –
3.75%, more balanced with 3.875% today
- 15 YEAR FIXED –
- 5 YEAR ARMS – low
3% range, huge variations from lender to lender.
Guidance: Yesterday we talked about getting more and more biased toward locking the lower and lower rates went. Even though rates rose slightly today, they didn’t rise past the levels seen on Wednesday when we first started ramping up the lock bias. The reason we increasingly favor locking at these rates has nothing to do
with what we think the market is going to do and everything to do with
managing risk based on current information and past precedent. “Risks of
floating” ≠ “possible returns” when the Best-Execution rate is less only a quarter point away from it’s all time low.
Not only that, but even markets may be giving us clues that rates
would have a hard time improving much right now anyway! As we’ve
discussed in the past, although Mortgage-Backed-Securities are the most
accurate and direct drivers of mortgage rates, longer-dated US
Treasuries do also tend to move in the same direction. Considering the
recent trading range in 10yr yields lies between 1.95 and 2.14 and that
10yr yields bounced off 1.95 yesterday and confirmed the move higher today, the
broader bond market may have a tough time making any more gains next week if this technical resistance in 10yr yields is telling us
the truth. But in general, we wouldn’t advocate trying to get that far
ahead of the markets. Just knowing that today’s rates are “about as low as they’ve ever been,” is good enough reason to consider pulling the trigger.
Ongoing Batting Cage Metaphor: (this can be applied to any endeavor where you’re trying to “go out on a high note”). Rate
offerings from lenders over the past month have been like a temperamental
pitching machine in a batting cage-generally getting the ball across the plate,
but with no really juicy pitches. But recently, we’ve seen some more
consistently good pitches (best-ex around 4.0% instead of 4.25%). Sure…
you’ve seen better, but not by much (3.875% and RARELY 3.75%). How
many more will you count on before calling it a day? Personally, I’d
like to end my batting cage session with a nice hit. The more
“pitches” you wait for with rates already at a 4.0%, the greater the
risk that the next pitch will be a curve-ball. To drop the metaphor,
although rates this low CAN go slightly lower, the improvements are fairly
minimal compared to how much higher they could go. Still, if you’re not
in any particular need to refinance and are operating on a longer-term
perspective, we continue to feel good about that “wall” at a 4.25%
best-execution level as a good stop-loss point for inclined floaters. Ask
us to explain more about that if it doesn’t make sense.
Another way of looking at the lock/float spectrum based on the lowest MBS coupon actively trading and being produced in the secondary mortgage market: