Mortgage Rates: Floating Remains Risky vs Slim Potential Rewards

By: Matthew Graham •

Today was another quiet for Mortgage Rates, and once again we're dealing with Best-Execution rates right where they were yesterday with some minor improvements in closing costs.   

Today's BEST-EXECUTION Rates

  • 30YR FIXED -   4.0%, Some 4.125%, Very few 3.875%'s
  • FHA/VA - 3.75%, more balanced with 3.875% today
  • 15 YEAR FIXED -  3.375%-3.5%
  • 5 YEAR ARMS -  low 3% range, huge variations from lender to lender.

Guidance: Even though markets will be open for a short day on Friday, tomorrow will basically be the last day of the week, and there's lots of economic data on tap with decent market-moving potential.  In addition, the fact that it's "basically the last day of the week" may make markets more hesitant to test the limits of recent trends.  Considering that the recent trends in bond markets, including the Mortgage-Backed-Securities that drive lender's interest rates, has been to test their lowest recent rates, that makes it less likely for rates to improve tomorrow.  It's not impossible, and neither should you read this as indicative of a market bias on our part, simply that the risks of floating outweigh the limited potential rewards yet again.

 See Rates from Lenders in Your Area

Ongoing Batting Cage Metaphor: (this can be applied to any endeavor where you're trying to "go out on a high note").   Rate offerings from lenders over the past month have been like a temperamental pitching machine in a batting cage-generally getting the ball across the plate, but with no really juicy pitches.  But recently, we've seen some more consistently good pitches (best-ex around 4.0% instead of 4.25%).  Sure... you've seen better, but not by much (3.875% and RARELY 3.75%).  How many more will you count on before calling it a day?  Personally, I'd like to end my batting cage session with a nice hit.  The more "pitches" you wait for with rates already at a 4.0%, the greater the risk that the next pitch will be a curve-ball.  To drop the metaphor, although rates this low CAN go slightly lower, the improvements are fairly minimal compared to how much higher they could go.  Still, if you're not in any particular need to refinance and are operating on a longer-term perspective, we continue to feel good about that "wall" at a 4.25% best-execution level as a good stop-loss point for inclined floaters.  Ask us to explain more about that if it doesn't make sense. 

Another way of looking at the lock/float spectrum based on the lowest MBS coupon actively trading and being produced in the secondary mortgage market: