continue to ebb and flow in the same pattern that has persisted for over a month. The average Best-Execution interest rate for a 30yr fixed loan has remained at 3.875% during that time and the closing costs associated withtthat rate have been gently rising and falling, with increasing regularity. We’ve rarely strung together 3 days in a row with movements in the same direction (i.e. borrowing costs rise very slightly 3 days in a row, while Best-Ex stays at 3.875%), and the actual difference in those costs day over day continues to be fairly minimal.
Those borrowing costs rose very slightly today, a reasonable conclusion to the previous two sessions offering all time low rate/fee combinations. This means that whereas 3.75% was “as close as it’s ever been to sharing equal recognition with 3.875% as a viable choice for Best-Execution,” that’s no longer the case today, but it should be noted that the buydown schedule (amount of additional closing costs required to move down in rate) at some lenders allows for scenarios with even lower rates to make sense depending on your preferences and qualifications.
If you didn’t catch Friday’s Article, which
went into a bit more detail on how we determine “Best-Execution,” it’s
worth a read. But the bottom line is really this: regardless of the
actual interest rate levels, there’s no other way to say the following: rates are as low as they’ve ever been. How long will
this continue? There’s no way to know for sure, but we generally
advocate a conservative approach with rates at all time lows.
“Conservative” in this sense simply means that history has shown us how
quickly record-low rates can disappear. While we certainly wouldn’t
rule out the possibility that rates can improve, we’ve already been
experiencing the fact that further gains are hard-fought and take more
time than gains seen in the middle of the range.
Whatever your disposition toward locking vs floating, it makes sense
to set yourself a “stop,” of sorts, by deciding on a rate slightly
higher than what you’re currently being quoted, at which you’d lock at a
loss if the market moves against you. Locking in such a scenario can
prove exceedingly frustrating more often than not as the higher
probability eventuality has been for rates to return lower, but this
pales in comparison to the potential frustration of rates NOT returning
Today’s BEST-EXECUTION Rates
- 30YR FIXED – 3.875%, 3.75% as close as it’s been
- FHA/VA -3.75%
- 15 YEAR FIXED – 3.375% / 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
operate near all-time levels, and as 2011 showed us, it doesn’t always
mean they’re done improving.