Mortgage Rates Hit Snag Following Recent Improvements

Recent improvements in Mortgages Rates hit a snag today, and rose to fall roughly in line with Friday’s levels.  However, with the exception of the past 3 days, Friday’s rate sheet offerings were the strongest since early March.  There continues to be a greater-than-normal variability between lender offerings.

Yesterday’s rate sheets were strong enough for us to say the following:

The Best-Execution Conventional 30yr Fixed Rate is probably best viewed as 3.875% for flawless scenarios, and 4.0% for many others.  Financially, in terms of “bang for the buck,” 4.0% is still the best deal, but many lenders can offer 3.875% with the same closing costs for pristine borrower scenarios. 

After today’s losses, there’s less of a case to consider 3.875% as a more prevalent Best-Execution Rate than 4.0% especially considering that 4.0% continues to offer better “bang for the buck.”  

(read more about Best-Execution calculations).  

We’d been looking toward today’s 10yr Treasury auction to inform the trading levels of Treasuries and MBS (“mortgage backed securities” that most directly govern mortgage rates).  But as it happened, all of the market movement was seen in the overnight session, during Asian and European market hours.  And although the overnight session resulted in weaker levels for Treasuries and MBS when domestic markets opened, they barely budged throughout the session and remain almost exactly at 8am levels right now.  

Markets seem like they’d be willing to go either way into the end of the week–susceptible to unexpected headlines if they’re of sufficient importance.  By default, things seem to lack firm commitment or “trend.”  That analysis isn’t a very big leap on a day as flat as this one, but the implication is that we’d STILL leave it up to the day’s events to shape the trade.  

The 10yr auction today happened to come through almost exactly as expected so there wasn’t a strong indication that markets should move in one direction or another.  Tomorrow brings the last of the week’s Treasury Note/Bond auctions with the 30yr at 1pm, as well as more important economic data in the morning hours.  

Today’s BEST-EXECUTION Rates 

  • 30YR FIXED –  3.875%-4.0%
  • FHA/VA -3.75%
  • 15 YEAR FIXED –  3.125-3.25%
  • 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
  • We’ve recently spent time further away from the very best levels of the past few months having broken away from a long, stable trend.
  • That led us to expect greater volatility, and indeed we got it!
  • But now that volatility MIGHT be depositing us back at the edge of the old, stable range.  Whether it lets us back in or not, is another story.
  • Rates could easily move higher or lower, but given the nearness to all time lows, there’s generally more risk than reward regarding floating
  • (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).

…(read more)

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