Mortgage Rates Inch Back Into Historically Low Territory

By: Matthew Graham •

Mortgages Rates improved again today, though some lenders' rates were little changed.  This marks the second day of moderate improvement and consolidation after a strong move lower by most lenders on Friday.  There's a greater-than-normal variability between lender offerings, but in general, mortgage rates are near their best levels of the month.

The Best-Execution Conventional 30yr Fixed Rate is probably best viewed as 3.875% now for flawless scenarios, and 4.0% for many others.  Financially, in terms of "bang for the buck," 4.0% is still the best deal, but many lenders can offer 3.875% with the same closing costs for pristine borrower scenarios.  

As always, keep in mind that we track best-execution rates based on an ideal scenario in order to have a static frame of reference to capture the day to day MOVEMENT of interest rates.  

 See Rates from Lenders in Your Area

(read more about Best-Execution calculations).  

After many participants in global financial markets were out yesterday, volume and participation came roaring back today, and overwhelmingly in favor of lower benchmark interest rates such as US Treasuries.  MBS (the "mortgage backed securities" that most closely affect lenders' mortgage rate offerings) weren't quite able to keep up with the rally.  

This 'underperformance' by the secondary mortgage market is common when broader bond markets rally like they have today, but other factors can contribute to mortgage rates' tendency to move lower at a slower pace than Treasuries.  We discussed some of those factors HERE in the past.

In addition to the previous thoughts on that underperformance, there's another more positive reason in play at the moment.  Over the past month (roughly), mortgage rates have generally outperformed Treasuries in terms of how they have moved relative to each other.  

Consider the fact that the all time low Best-Execution level in mortgages was 3.875% and that closing costs are fairly close to their all time lowest levels for that rate.  Treasuries on the other hand are just under 2.0% for 10yr Notes today versus a recent multi-decade low of 1.67%.  

Speaking of 10yr Treasury Notes, there's an auction of $21 billion dollars worth tomorrow at 1pm.  The results of the auction have the potential to affect trading levels in related markets such as MBS.  All that to say that there are events ahead that can have either a positive or negative impact on rates.  Given the recent strength, we're feeling slightly more "on guard" for some sort of correction if for no other reason than we're closer and closer to all time lows and haven't had much luck moving lower.

Today's BEST-EXECUTION Rates 

  • 30YR FIXED -  3.875%-4.0%
  • FHA/VA -3.75%
  • 15 YEAR FIXED -  3.125-3.25%
  • 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
  • We've recently spent time further away from the very best levels of the past few months having broken away from a long, stable trend.
  • That led us to expect greater volatility, and indeed we got it!
  • But now that volatility MIGHT be depositing us back at the edge of the old, stable range.  Whether it lets us back in or not, is another story.
  • Rates could easily move higher or lower, but given the nearness to all time lows, there's generally more risk than reward regarding floating
  • (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).