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 closer
FHA/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 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 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.

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The monthly Employment Situation Report was released at 8:30am this morning, with much better-than-expected results.  Stocks rallied sharply and most every interest rate in fixed-income markets moved higher.  The economic optimism created by this sort of data tends to increase demand for riskier investments like stocks and lower demand for things like fixed-income notes and bonds.  MBS (the "mortgage backed securities" that most directly govern mortgage rates) fall into this fixed-income sector, and definitely weakened following the jobs data.  As a result, Mortgages Rates moved higher at their fastest pace in some time, traversing most of this week's territory, but leaving Best-Execution rates mostly at 3.875%.  (learn more about how we calculate Best-Execution in THIS POST). 

We'd said yesterday that MBS were looking like a runner in baseball taking a "lead-off," waiting to find out whether or not the jobs data would be "a hit."  We went on to say a stronger than expected report would result in MBS simply moving back to the safety of the base to wait for the next pitch.  That's essentially what's transpired today.  Our heroic little base-runner was clearly spooked by the data, and clearly backtracked to previous ground.  But in the process, we see "the base" metaphor emerging as a real possibility, in that markets weakened, but were able to dig in and hold firm after a certain point.  Bottom line, the runner is back on the base, but was not "tagged out," at least not today.

The next pitches will be thrown next week in the form of US Treasury auctions.  While it's true that mortgage rates are based on MBS and NOT on Treasuries, the Treasury Auctions are still a significant event for MBS, especially the longer maturity issues on Wednesday and Thursday.  Things are less certain on Monday and Tuesday, and it's possible rates could be weaker if markets extend today's movements against the backdrop of limited economic data on those first two days of the week.  We'll know a lot more about how longer-term trends are evolving with the passing of at least the first important auction, Wednesday's 10yr Notes.  Between now and then, 3.875% Best-Execution is STILL on the table, albeit at a higher cost than yesterday.  The point is that if you didn't lock yesterday, today is not so much worse that you should just hold off indefinitely.  For those who are taking the risk floating into next week, things could get bumpy, but we'll know a lot more about that on Wednesday. 

On a final note, we have to put out the constant caveat that European headlines do not adhere to a schedule and certainly have the potential to move markets in unexpected ways, by unexpected amounts, at unexpected times.

Today's BEST-EXECUTION Rates

30YR FIXED -  3.875% mostly, less 3.75 today, 4.0's getting closer
FHA/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 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 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.

View the original article here

After setting new record lows yesterday, Mortgages Rates rose slightly today, though 3.875% best-execution remains intact.  Rather than affect the prevailing rates being quoted, today's weakness is most likely to be seen in the form of slightly higher borrowing/closing costs for the same rates quoted yesterday (learn more about how we calculate Best-Execution in THIS POST).  The increases run counter to today's market movements as well.  

Treasury yields are lower again today, and MBS (the "mortgage-backed-securities" that most directly govern interest rates) are slightly improved as well.  One reason that loan pricing hasn't adjusted to match that fact is that MBS weakened late in the trading session yesterday.  Not all lenders priced that in by issuing adjusted rate sheets, instead reflecting the changes in this morning's rates.  The MBS market was indeed weaker this morning, so if we're comparing the time of day that most lenders put out their first rate sheets, today was indeed worse than yesterday.  Beyond that objective explanation, we also have to consider the fact that continued rate improvements from all-time lows are going to continue to be slow and hard-fought.  Lenders have little incentive to offer lower rates if current offerings are generating more-than-sufficient demand.  (read more on this topic in this previous post)

Finally, and although it's not the only other potential factor, this Friday's Employment Situation Report (aka "jobs report," or "NFP") represents a high-risk situation, ESPECIALLY with mortgage rates at or near all-time lows.  NFP, which stands for the the reports chief component "Non-Farm-Payrolls" is generally regarded as the single most important piece of economic data each month.  Even against the current backdrop of European headlines exerting more and more influence on domestic markets, it's immensely important.  Based on where markets sit right now, we think that rates are somewhat vulnerable if the report is better-than expected.  In other words, there's a certain natural level of "push-back" at current rate levels anyway, and a bullish jobs report would probably accelerate that. 

This, of course, is contingent on the report coming in with better-than-expected results.  If the opposite happens, rates could still improve.  It's just that those improvements would likely be slower and smaller than the losses would be in the opposite scenario.  It's also very much contingent on rates not moving much between now and Thursday afternoon, which may or may not be the case.

Today's BEST-EXECUTION Rates

30YR FIXED -  3.875% mostly, with a few lenders on either side of this
FHA/VA -3.75%
15 YEAR FIXED -  3.25%, some lenders venturing lower, some completely stuck at 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 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 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.

View the original article here