Mortgage Rates Continue Bouncing Along The Bottom

By: Matthew Graham •

Mortgages rates are unchanged to slightly lower today, after shying away from multi-month lows yesterday.  A weaker than expected employment report helped underlying rates markets start the day off in good territory, but further progress was elusive.  The net effect was insufficient to cause any mid-day reprices and left lenders' offerings in only marginally better territory on average, with no change to the prevailing 3.875% Best-Execution rate for Conventional 30yr Fixed loans. (read more about Best-Execution calculations). 

At this point, rates are basically bouncing along the bottom of their all time range.  They might not be absolutely as low as some of the very best moments of the last 6 months, but we're talking about very small fluctuations in closing costs while rates themselves are unaffected. That means that the actual interest rate you're quoted should be the same over the past few days (weeks even!) with the changes being seen in the borrowing costs, or the amount of lender credit depending on your scenario.

 See Rates from Lenders in Your Area

"With rates at all time lows I have been advising clients to lock the loan if they like the rate they are quoted," says Jason Zimmer, president of Parlay Mortgage and Property.  "I see very little upside to floating and I have been giving this advice for the last several months.  The only exception is for people with new construction purchases or any purchase over 60 days away."

Zimmer is in good company.  With the high-risk event of Friday's mighty Employment Situation Report (also referred to as NFP for the report's headline "Non-Farm-Payrolls" figure) on the horizon, combined with the historical tendency for rates to have a tough time making any progress into lower territory, there's a good case to be made for locking right now.  

Matt Hodges at Presidential Mortgage Group agrees.  "Over the past couple of days, locking has been the preferred recommendation to borrowers.  The obvious concern regarding Friday's NFP is that borrowers will face higher costs if the report surprises to the upside.  Less obvious is the possibility that even a weak report might not motivate rates much lower," explains Hodges.  "Normally, weak economic data is good for rates, but at current levels, Lenders are increasingly concerned with volatility, re-negotiations, and blown lock commitments.  That makes any further progress slow-going, and in my view, generally not worth the risk."

This is very much in the same vein as yesterday's comments on the upcoming risky events:  

We have two ingredients.  First, there's the fact that historical examples of the Jobs report coming up on Friday have been among the biggest potential market movers on any given month.  There are plenty of times where this DOES NOT turn out to be the case, but if you lined up all the various pieces of scheduled data each month next to their corresponding market movements over time, The Employment Situation report would be at the top along with FOMC Announcements.  

Second, there's the fact that lenders' rate sheet offerings haven't been much lower than they are currently.  Now...  "much lower" is subjective, of course.  The few hundred dollars in closing cost difference could mean different things to different people. Additionally, certain scenarios that are on "the edge" between two different interest rates (say 4.0% and 3.875%) could actually move down in rate within the confines of the "not much" generality above.  But on average, Best-Execution rates for 30yr Conventional loans have been CLOSE to edging down to 3.75, but have never done so on a widespread basis or for more than a day.  

"The bottom line is that we can't know exactly what lies ahead with Friday's data.  It could take markets either way.  What we do know is that there's limited incentive to float at current levels," explains Victor Burek of Benchmark Mortgage.  "Historically, mortgage rates have more room to move higher than to move lower. As the saying goes, its always better to lock when you should have floated, then to float when you should have locked."

Today's BEST-EXECUTION Rates 

  • 30YR FIXED -  3.875%
  • 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
  • Current levels have experienced increasing resistance in improving much from here
  • Rates could easily move higher or lower, but given the nearness to all time lows, there's generally 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.
  • (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).