Mortgage Rates Improve Moderately On Greece Concerns

By: Matthew Graham •

Mortgages Rates improved slightly today after rumors circulated regarding Greece's private bond swap efforts.  Today's improvements tip the scales of the Conventional 30yr Fixed Best-Execution rate back slightly in the favor of 3.875%.  More of the lenders in our daily survey stood at 4.0% yesterday.  

In many cases, the rate you would have been quoted yesterday and the rate you're likely to be quoted today will be the same, with the improvements being seen in the borrowing costs as opposed to the rate itself. To learn more about why this occurs, see this previous post with more detailed discussion about Best-Execution calculations. 

Along with Friday's Employment Situation Report, the Greek Bond Swap was the other key event we noted in yesterday's commentary.  Here's how we described it:

 See Rates from Lenders in Your Area

"The other key event will be the deadline for Greece's private sector bond swap.  To oversimplify, EU officials have already decided how much of a loss will be taken by any of Greece's private sector investors (banks, insurance funds, investment firms, etc...) that decide to participate in the so-called swap (investors would swap out current bonds for the less lucrative ones, thus taking a "haircut").  If a sufficient percentage of investors acquiesce to the haircuts by Thursday, it's a net-positive for Greece and the Euro-zone, and likely another challenge for longer term rates in the US."

Although Thursday is indeed the deadline, today's market-moving consisted of rumors and subsequent denials that Greece would not secure enough participation in the swap, thus forcing an extension of the deadline, or a "credit event."  The latter is tantamount to what many in the news media have deemed an "orderly default," and would cause some amount of shock to the European financial system.  It's the risk this shock that is helping drive safe-haven demand for US Treasuries today, and MBS (the Mortgage-Backed-Securities that most closely dictate mortgage rates) which tend to move in the same direction as Treasuries, but by varying degrees, simply came along for the ride.

Today shows us that one of our suspected market-movers is indeed a concern for markets, and that it can cause volatility even before it's calendar deadline.  Today's volatility worked in our favor, but that's no guarantee that this will continue to be the case over the next two days.

Today's BEST-EXECUTION Rates

  • 30YR FIXED -  4.0% with 3.875% making a comeback
  • 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).