Mortgage Rates are steady to slightly improved today following as Europe’s fiscal woes continue providing downward pressure on US interest rates. The forces at work keeping rates low were joined today by “minutes” from the most recent FOMC meeting. All told, several notable lenders are offering their all-time lowest interest rates while others remain close.
Markets actually got off to a shaky start as far as rates were concerned. Had it not been for the European headlines and the FOMC Minutes, we’d likely be looking at slightly higher rates today. Mortgage-backed-securities (aka “MBS,” the most direct influence on mortgage rates) and US Treasuries began the day in weaker territory until news that the European Central Bank had ceased it’s normal interactions with several Greek banks, and the ECB President essentially wasn’t willing to bend over backwards to make sure Greece stays in the Euro-zone. We discussed the implications of a Greek Euro-zone exit in yesterday’s post.
The ECB-related news helped bond markets bounce back into stronger territory and FOMC Minutes added to that momentum. Though there were no major surprises out of the Fed, the Minutes indicated that the Fed remained in sort of uncertain territory with respect to further quantitative easing, which thus far, has been a major boon for rates.
Markets were perhaps guarded against the possibility that the Minutes would indicate a shift AWAY from an accommodative stance. The fact that the minutes did no such thing, combined with the consideration that this meeting took place BEFORE the most recent bout of Euro-drama was enough for markets to infer a slightly economically bearish bias from the Fed, and the Fed combats economic bearishness by keeping rates low.
For only the 3rd time since early February, the Conventional 30yr Fixed Best-Execution Rate is arguably straddling 3.75% and 3.875%. Some lenders’ rate sheets are structured such that 3.75% is clearly Best-Execution. More have moved down into that territory, though many remain at 3.875%. (read more about Best-Execution calculations)
Until and unless mortgage rates actually break into NEW all-time lows (which they are very close to doing), we’ll likely keep reiterating that which has already been said:
We see two diametrically opposed forces pushing and pulling on mortgage rates here at these key levels. The European component is the obvious force pushing rates down, but less obvious is the underlying structure of the Secondary Mortgage Market providing resistance to moving lower. The latter is what has prevented rates from getting any lower now and in the past.
That said, if the economic outlook remains fairly dim and if European concerns continue to fuel that “flight-to-safety” demand for long enough, the Secondary Mortgage Market CAN slowly evolve to accommodate lower rates. It remains to be seen whether or not it will actually happen. Global economic panic is not our favorite justification for thinking rates will move predictably lower.
Investors in the secondary mortgage market have demonstrated that they tend to feel the same way, having clearly avoided a quick move down into uncharted territory with respect to the “buckets” on the secondary mortgage market. Read more about “buckets” HERE. Without a more stable motivation for low interest rates, we’d expect ongoing progress in creating a market for even lower rates to continue to be slow and small.
Today’s BEST-EXECUTION Rates
- 30YR FIXED – 3.75-3.875%
- 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).