Although the recently confirmed 3.875% Best-Execution level remains intact for 30yr fixed, conventional loans, Mortgages Rates moved slightly higher today in terms of the costs required to obtain those rates. Weakness in Treasuries today was more pronounced than MBS, the "mortgage-backed-securities most directly responsible for determining mortgage rates. (learn more about how we calculate Best-Execution in THIS POST).
Initially driving today's market movements was news that political leaders would meet in Greece to vote on a soon-to-be-drafted bailout package. Greek officials have been reluctant to stand up in favor of creditor-imposed austerity. Even though they likely realize the dire implications of such reluctance, the political backlash from Greece's populace is pretty dire in it's own right. But that realization has been slow to work its way through markets, which seem to be willing to wait in upbeat anticipation for new developments in Greece that never seem to happen--at least not on time.
It was the same again today. Markets were initially upbeat on the promise of ongoing negotiations being concluded. When we say "markets" in this context, it's more to do with equities/stocks, whereas mortgage rates are part of bond markets. When markets are upbeat in this way, it decreases the demand for less risky investments such as Treasuries and MBS. When demand decreases for MBS, prices fall, and that means that lenders will earn less by selling pools of loans on the secondary market, and must raise rates to keep pace with their various cash-flow considerations.
Even after news came out that the meeting in Greece would not take place until tomorrow, stocks only faltered momentarily, deciding that the nature of the news (no material objections to the proposal on the table, simply a delay in getting it drafted) wasn't enough to reverse the current course. Bond markets, however, were able to put an end to a somewhat ugly slide weaker. The damage had already been done as far as mortgage rates would be concerned, but the silver lining is that it only amounted to minimal increases in borrowing costs while most scenarios will still be best-executed at the same rates today as yesterday's.
With the NEW potential resolution on Greek negotiations tomorrow as well as an important 10yr Treasury Auction, there are some sizable risks ahead for mortgage rates, which heretofore have done a good job of holding onto 3.875% Best-Execution through some rough waters. As always, markets and rates can move in either direction, but we would point out that those movements could be bigger-than-average tomorrow.
Today's BEST-EXECUTION Rates
30YR FIXED - 3.875% mostly, less 3.75 today, 4.0's getting closerFHA/VA -3.75%
15 YEAR FIXED - 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 levelsCurrent levels have experienced increasing resistance in improving much from hereThere are technical reasons for that as well as fundamental reasonsLenders 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 floatingBut 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).You can see a list of all comments on MND by clicking the 'Read the Latest Comments' option under the 'Community' menu.
