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Mortgage Rates Steady to Slightly Improved

Mortgages Rates have strung together 5 consecutive days of either holding steady or slight improvements.  Best-Execution for 30yr Fixed Conventional mortgages is clearly back down to 3.875% after beginning the recent winning streak closer to 4.0% (lender’s rate offerings tend to move in .125% increments).  Indeed, many lenders were at 3.875% yesterday as well, and the minor improvements we reference are seen only in the costs associated with those rates.

Additional reading: Previous post with more detailed discussion about Best-Execution calculations. 

Bond markets, including MBS (the “mortgage backed securities” that most directly influence mortgage rates), were interesting to watch.  Swings between highs and lows came quickly and more frequently than usual.  But viewed in a longer term context, the movements were quite tame, basically constituting a simple extension of yesterday’s sideways momentum.  The economic reports this morning contributed to the volatility, but weren’t able to coax MBS much higher than yesterday.  By 3pm, MBS and Treasuries had returned to the center of yesterday’s range, as if to indicate some level of unwillingness to stray too far off course before some future event.

We continue to view that “future event” as Wednesday.  It does contain several important pieces of economic data, including GDP, but we think the events creating the “wait and see” attitude in markets are threefold: Bernanke’s testimony to Congress, the second big 3-year refinance offering from the European Central Bank, and “month-end,” which can affect trading direction regardless of economic indications.

Yesterday we said: “We’d probably feel a bit more defensive if underlying MBS prices
don’t improve much tomorrow as they’ve been on a fence between the
better levels of mid-to-late January and recently lower levels seen
through most of February.”  After five days of holding steady or improving, and with the week’s best candidate for volatility being tomorrow’s trading day, and with best-execution having worked it’s way farther into 3.875% territory, we are indeed a bit more defensive.

Today’s BEST-EXECUTION Rates

  • 30YR FIXED -  3.875% back in control.  Some 4.0%  Some 3.75%
  • FHA/VA -3.75%
  • 15 YEAR FIXED -  3.25%, more 3.125% availability
  • 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).

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