Mortgage Rates Remain Exceptionally Strong Amid Exceptional Risk

By: Matthew Graham •

Mortgage Rates continue to demonstrate an uncanny stability at all-time-lows.  As far as the actual rates being quoted, nothing has changed.  Best-Execution has been a consistent 3.875% with only minor variations in borrowing costs between lenders on any given day. 

If it's detectable at all, today's movement is slightly on the positive side, but again, this only affects the borrowing costs associated with the same rates that were previously available. As we've noted, there's an increasing level of resistance to mortgage rate improvements at current levels.

It should also be noted that some lenders have experienced sudden changes in pricing that have raised costs noticeably. While some lenders are potentially gradually building in higher costs over the past few weeks, others are announcing precipitous changes due to the recently approved Tax Cut Extension.  Read more about that here:

 See Rates from Lenders in Your Area

Tax Cut Extension Now Officially Raising Mortgage Rates

This introduces another element of risk beyond the standard issue concerns about European headlines affecting domestic bond markets or the market-moving potential of Tomorrow's Employment Situation Report, both of which were mentioned in more detail HERE.  So although Best-Execution rates remain unchanged on average, things could change fairly quickly depending on the lender in question, and that could happen regardless of any underlying market movement. 

Given the uncertainty of tomorrow's reaction to employment data, the uncertainty over how some lenders will price in the new tax cut extension fees, the ongoing uncertainty of the European Debt Crisis, the fact that MBS (Mortgage-Backed-Securities) are at 3-month highs, and that rate/fee combinations are at their all-time lows, today stands out as one of the better opportunities to lock vs float in recent memory.

Today's BEST-EXECUTION Rates

  • 30YR FIXED -  3.875%, glimpses of 3.75% at the top few lenders.
  • FHA/VA -3.75%
  • 15 YEAR FIXED -  3.375%
  • 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 operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.