Mortgage Rates Flat to Slightly Improved After Auction, Greece News

By: Matthew Graham •

For several sessions in a row, Mortgages Rates have moved in the opposite direction from the previous session, although even the bigger examples of these movements haven't been enough to nudge 3.875% out of the "best-execution" position.  The same back-and-forth movement continued today as rates improved ever so slightly after rising slightly yesterday.  Keep in mind, that the term "rates" in this context refers to the combination of the interest rate itself and the closing/borrowing costs required to obtain that rate.  We explain more about Best-Execution calculations in THIS POST.

Also in the same vein as yesterday, today's market movement began in reaction to headlines surrounding Greece's ongoing negotiations with creditors (the 3 official creditors, the ECB, IMF, and European Commission are collectively referred to as "The Troika") regarding current bailout efforts.  The circulation of a draft agreement of the Troika's terms, which was delayed yesterday, was quickly forgotten this morning after news broke that the ECB might work a 3-way deal between Greece and the EFSF (which is the EU "Bailout Fund," sort of like TARP was to the US), that would ultimately leave Greece with €11 billion less debt, while the ECB would walk away having stuck to their guns and the EFSF would foot the bill.  If all that stuff sounds confusing, that's because it is.  It's also, unfortunately, one of, if not THE biggest source of movement for mortgage rates in the US.  Good times...

The US 10yr Treasury Auction was also an important event from today, and it didn't seem to indicate a great deal of optimism that that current goings on in Europe would do anything to fundamentally alter the very scary bigger picture.  The reason we say that is because there were more than three dollars bid for each of the $24 billion auctioned today, slightly higher than the historical average, and those bids were satisfied earning as little as 2.02% on 10yr loans to the US Government.  That's just not the sort of thing that has ever happened until markets became increasingly concerned about a Euro-Zone meltdown.

The generally low Treasury yields provide an ideal environment for generally low Mortgage Rates, though we're fond of reiterating that Mortgage Rates are not based on Treasuries.  Although Treasuries and MBS (the "mortgage-backed-securities" that most directly govern rates) are often moving in the same direction, the magnitudes of that movement can vary, and sometimes, they can move in different directions.  The trading day isn't over yet, but at several times today, MBS have been lower in yield while Treasuries have been higher, thus the slightly improved mortgage rates.

Today's BEST-EXECUTION Rates

  • 30YR FIXED -  3.875% mostly, few 3.75's and 4.0's
  • 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 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 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).