The borrowing costs required for average Mortgage
Rates rose today, in some cases high enough to nudge the actual interest
rate an eighth of a point higher. This is the first time in over a week that we’ve seen recent BestExecution rates threatened.
Yesterday we mentioned “risk that economic data or news headlines will cause
market volatility sufficient to send rates higher.” That’s what happened today as the European
Central Bank announced new programs to provide liquidity to European
Banks. That’s generally good for stocks,
bad for bonds, not to mention the fact that a large component of the recent
rally in rates is the fact that investors are treating the bond market as a
safe-haven against an uncertain outlook in Europe.
The show ain’t over yet though.
Markets moved today, but not catastrophically. The overall movement in the Secondary
Mortgage Market wasn’t much different than previous sessions. Rather, the fact that it happened abruptly
caused a slightly greater degree of adjustment among lender rate sheets.
CURRENT MARKET*: The BestExecution 30-year fixed mortgage rate
is no longer solidly at 4.125%, but now straddles 4.125% and 4.25%
Several lenders are willing to offer lower rates, but in most cases, those
quotes carry additional closing costs. On FHA/VA 30 year fixed BestExecution
is straddling 3.875% and 3.75%, (no change). Deals
can be structured with lower rates, but again, you’ll pay more for those, so
make sure you assess the time it takes to break-even on the extra
expense. 15 year fixed conventional loans are best priced at 3.375% (no
change). Five year ARMs are best priced at 3.125% (no change). Please note there can be a fair amount of
variety between lenders and that this has been exaggerated by recent market
GUIDANCE: Our strong position in the spectrum of borrowing costs for
BestExecution rates was damaged today by the headlines out of Europe. That means we’re no longer closer to moving
down than moving up and that if you still have access to the same rate as
yesterday, the arguments for locking it in have greatly increased. We’d continue to caution that much of the
current strength in bond markets is due to uncertainty in Europe and the
headlines that can change that outlook DO NOT adhere to a schedule (as was
demonstrated this morning). In other words, things can change
rapidly. We continue to favor locking due to the nearness to all-time
lows. If you’re absolutely determined to
“float it out” or otherwise don’t have an urgent need to refi but are just
waiting to see if rates get better, it seems that markets are shifting their
focus to next week’s high-risk event, the 2 day FOMC meeting on the 20th
and 21st, not to mention ongoing potential for unexpected headlines
between now and then.