Mortgage Rates Widely Stratified, Some Improvements

Interest Rates

Mortgage rates actually improved in many cases today though we’d note that lender pricing strategies and day over day price movements are about as widely varied as we’ve seen them.  That means that some lenders’ rates are improved versus yesterday while others are worse.  On average, this is the first day in the last seven where we’ve clocked an improvement on average.  This is a Pyrrhic Victory in the context of those 7 days as the average best-execution is still roughly 60bps higher than it was on the last positive day.  The most prevalently quoted rates for top tier scenarios are still in the 4.625% to 4.75% range with the improved lenders passing on gains in the form of decreased borrowing costs or increased lender credit depending on the scenario.

Days like today are dangerous because they sow the seeds of hope when hope isn’t necessarily “safe” yet.  From a logical standpoint, if the situation for mortgage rates has been, for lack of a technical term “really really bad,” and if that badness began to slow down yesterday, and if we saw gains today, then one might assume a corner has been turned.  Indeed, this isn’t normally all that bad of an assumption to make about market movements and it could be the case that rates improve tomorrow as well.  The important point is that IF rates manage to improve tomorrow, it would be pure coincidence.  We’re still not there yet in terms of seeing the consolidation and strength moving in the other direction that we’d want to see before having more confidence that the worst was behind us.  Beyond that, we stand a good chance to be at the mercy of the day’s data and events.

Even with today’s improvements factored in, the overall move of the past 2 months continues to be one of, if not THE most significant move in the modern history of mortgage rates (in terms of the pace of change).  Instead of retelling the “story” of this crash, we’ll simply catalog some of the recent relevant discussions for those wanting more background on the abrupt movements:

May 22nd: Why Did Mortgage Rates Skyrocket Past 2013 Highs on Wednesday?

May 28th: Mortgage Rates Vault Catastrophically Higher

June 19th:Mortgage Rates Annihilated; Brief History of All-Time Lows

June 21st: Nightmare for Mortgage Rates: Way Worse Than Freddie Told You


Loan Originator Perspectives

“If you have been watching rates lately you might be very frightened
right now, and with good reason. Many potential buyers have seen their
buying power erode over the last few weeks. At least for now, the
bleeding seems to be slowed, but we are still experiencing weakness. If
closing within 30 days, we are advising to lock. If you have a
tolerance for risk and a longer time frame, it may finally be time to
sit back and see if rates begin to correct a bit here.” –Alan Craft, Branch Manager, Prime Mortgage Lending Inc

“Good news/bad news in MBS Land today as markets opened higher only to be
done in by strong consumer confidence numbers. We closed with minimal
losses, certainly better than last week’s debacles, but we’re far from
recovery mode yet. At any rate, flat days are better than huge losses,
and we can at least fantasize about setting a short term ceiling on
rates!” –Ted Rood, Senior Originator, Wintrust Mortgage


Today’s Best-Execution Rates

  • 30YR FIXED – 4.625-4.75%
  • FHA/VA – 4.25-4.50% 
  • 15 YEAR FIXED –  3.75%
  • 5 YEAR ARMS –  2.875-3.375% depending on the lender

Ongoing Lock/Float Considerations

  • After rising consistently from all-time lows in September and October 2012, rates challenged the long term trend higher, but failed to sustain a breakout
  • Uncertainty over the Fed’s bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
  • Fears about the Fed’s bond-buying intentions were proven well-founded on May 22nd when rates rose to 1yr highs after the Fed indicated their intention to taper bond buying programs sooner vs later
  • The June 19th FOMC Statement and Press Conference confirmed the suspicions.  Although tapering wasn’t announced, the Fed made no move to counter the notion that they will decrease bond buying soon if the economic trajectory continues
  • Rates Markets “broke down” following that, as traders realized just how much buy-in there was to the ongoing presence of QE.  These convulsions led to one of the fastest moves higher in the history of mortgage rates and market participants have not been eager to be the among the first explorers to head back into lower rate territory until they’re sure they’ll have some company.
  • (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario.  There are many reasons a quoted rate may differ from 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).

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