Mortgage Rates Continue to See Minor Improvements

Mortgages Rates improved again today as domestic economic data failed to inspire markets to move in either direction and optimism over today’s conference call between Greece and its creditors deteriorated.  In general, economic optimism tends to coincide with interest rates moving higher.  Mortgage rates began the week fighting back against this generality as anticipation for today’s conference call weighed on bond markets and MBS (the “mortgage-backed-securities” that most directly influence mortgage rates).

It became clear earlier today that the conference call would not offer any sort of sweeping solution to ongoing Greek bailout negotiations.  Uninspired by today’s manufacturing data at home, bond markets traded higher in price for a fourth straight day.  As price goes up, yields (or “interest rates”) go down.  That momentum persisted throughout the day, pausing briefly to consider the announcement that the conference call had ended, but leaving most of the gains intact. 

Today’s improvements are small on average, but continue bringing the prevailing 3.875% Best-Execution rate for conventional 30yr fixed loans close to 3.75%.  Some of the most aggressively priced lenders in the market already have feasible pricing at 3.75% (for 100% ideal scenarios), while the average of all the lenders in our survey remains at 3.875%.  Current averages are very close to the lowest we’ve ever recorded.  To quantify that, if rates were to experience 2-3 more days of similarly modest improvements, averages would likely match or surpass historic lows.

Whether or not that happens is another story.  Rates have been in this range before, on several occasions in fact, and each time have experienced increasing difficulty the lower they’ve moved.  We’re not suggesting this is a hard and fast rule, but simply pointing out the historical tendency for further improvements to be hard-fought below current levels.  As far as whether or not such battles could be won in the future, we’re not particularly biased in either direction.

Additional reading: A previous post with more detailed discussion about Best-Execution calculations.

 

Today’s BEST-EXECUTION Rates

  • 30YR FIXED –  3.875%, growing availability of 3.75%
  • FHA/VA -3.75%
  • 15 YEAR FIXED –  3.25%, glimpses of 3.125%
  • 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
    floating
  • But that will always be the case when rates operating near historic lows
  • (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).

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