San Diego Mortgage Group

Mortgage Rates are steady to slightly improved today following as Europe’s fiscal woes continue providing downward pressure on US interest rates.  The forces at work keeping rates low were joined today by “minutes” from the most recent FOMC meeting.  All told, several notable lenders are offering their all-time lowest interest rates while others remain close.  

Markets actually got off to a shaky start as far as rates were concerned.  Had it not been for the European headlines and the FOMC Minutes, we’d likely be looking at slightly higher rates today.  Mortgage-backed-securities (aka “MBS,” the most direct influence on mortgage rates) and US Treasuries began the day in weaker territory until news that the European Central Bank had ceased it’s normal interactions with several Greek banks, and the ECB President essentially wasn’t willing to bend over backwards to make sure Greece stays in the Euro-zone.  We discussed the implications of a Greek Euro-zone exit in yesterday’s post.  

The ECB-related news helped bond markets bounce back into stronger territory and FOMC Minutes added to that momentum.  Though there were no major surprises out of the Fed, the Minutes indicated that the Fed remained in sort of uncertain territory with respect to further quantitative easing, which thus far, has been a major boon for rates.

Markets were perhaps guarded against the possibility that the Minutes would indicate a shift AWAY from an accommodative stance.  The fact that the minutes did no such thing, combined with the consideration that this meeting took place BEFORE the most recent bout of Euro-drama was enough for markets to infer a slightly economically bearish bias from the Fed, and the Fed combats economic bearishness by keeping rates low.  

For only the 3rd time since early February, the Conventional 30yr Fixed Best-Execution Rate is arguably straddling 3.75% and 3.875%.  Some lenders’ rate sheets are structured such that 3.75% is clearly Best-Execution.  More have moved down into that territory, though many remain at 3.875%.  (read more about Best-Execution calculations)

Until and unless mortgage rates actually break into NEW all-time lows (which they are very close to doing), we’ll likely keep reiterating that which has already been said:

We see two diametrically opposed forces pushing and pulling on mortgage rates here at these key levels.  The European component is the obvious force pushing rates down, but less obvious is the underlying structure of the Secondary Mortgage Market providing resistance to moving lower.  The latter is what has prevented rates from getting any lower now and in the past.

That said, if the economic outlook remains fairly dim and if European concerns continue to fuel that “flight-to-safety” demand for long enough, the Secondary Mortgage Market CAN slowly evolve to accommodate lower rates.  It remains to be seen whether or not it will actually happen.  Global economic panic is not our favorite justification for thinking rates will move predictably lower.

Investors in the secondary mortgage market have demonstrated that they tend to feel the same way, having clearly avoided a quick move down into uncharted territory with respect to the “buckets” on the secondary mortgage market.  Read more about “buckets” HERE.  Without a more stable motivation for low interest rates, we’d expect ongoing progress in creating a market for even lower rates to continue to be slow and small.  

Today’s BEST-EXECUTION Rates 

• 30YR FIXED –  3.75-3.875%
• FHA/VA -3.75%
• 15 YEAR FIXED –  3.125 edging down to 3.00%
• 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).

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Mortgage Rates paused their recent trend of moderate improvement today to hold steady near all-time lows.   Despite an abundance of domestic economic data out this morning, rates continue to be indirectly fueled by political and economic turmoil in the Euro-zone.

After failing to form a new government, Greece today announced it would hold new elections.  Investors fear that those left in power will lead Greece to back-out of the austerity pledges required by the EU and IMF for recent bailout monies as well as Greece’s membership in the EU.

If Greece stops receiving that money, they’re all but guaranteed to officially default (their recent debt-restructuring was already a default by some standards), and also all but guaranteed to be booted out of the European Union.  If those things happen, investors fear a domino effect for the entire Euro-zone, and thus are currently very interested in the relative safety of German and US government debt–a phenomenon sometimes referred to as a “flight-to-safety.”

While it’s not clear how long European events will keep interest rates low and stable, it is clear that this has been the case, and has resulted in interest rates falling in line with all-time lows.

For only the 2nd day since early February, the Conventional 30yr Fixed Best-Execution Rate is arguably straddling 3.75% and 3.875%.  Some lenders’ rate sheets are structured such that 3.75% is clearly Best-Execution, though a majority remain at 3.875%.  But even among those lenders, 3.75% is an increasingly viable quote (read more about Best-Execution calculations)

Until and unless mortgage rates actually break into NEW all-time lows, we’ll likely keep reiterating that which has already been said:

We see two diametrically opposed forces pushing and pulling on mortgage rates here at these key levels.  The European component is the obvious force pushing rates down, but less obvious is the underlying structure of the Secondary Mortgage Market providing resistance to moving lower.  The latter is what has prevented rates from getting any lower now and in the past.

That said, if the economic outlook remains fairly dim and if European concerns continue to fuel that “flight-to-safety” demand for long enough, the Secondary Mortgage Market CAN slowly evolve to accommodate lower rates.  It remains to be seen whether or not it will actually happen.  Global economic panic is not our favorite justification for thinking rates will move predictably lower.

Investors in the secondary mortgage market have demonstrated that they tend to feel the same way, having clearly avoided a quick move down into uncharted territory with respect to the “buckets” on the secondary mortgage market.  Read more about “buckets” HERE.  Without a more stable motivation for low interest rates, we’d expect ongoing progress in creating a market for even lower rates to continue to be slow and small.  

Loan Originator Perspective With Rates At All Time Lows

Mike Owens, Partner with HorizonFinancial, Inc.

I always always lock and most of my clients agree it’s the save bet. Why play with fire? Rates always rise quicker than they retreat and there is too much upside risk to worry about an1/8 here or an 1/8 there. Rates are lower than any of us have ever seen so why get greedy?

Ted Rood, Senior Mortgage Consultant, Wintrust

The only thing flying high in the land of PIIGS (Portugal, Italy, Ireland, Greece, and Spain) these days is unrest and their bond yields. Biggest issue with domestic mortgages are that lenders may soon clamp down originations as their pipelines swell by raising their rates/pricing. Borrowers who procrastinate on their loans looking for an extra 1/8th% in rate may be rudely surprised when that happens. “Never try to catch a falling knife” is the Wall Street term for this situation. I’m redoing customers at 4.75% on current loans, while others at 6.0% “think about it”. Guess thinking is why they’re still at 6.0% instead of current 3.75% or so!

Jason Zimmer, Parlay Mortgage & Property

As interest rates continue to remain at all time lows, my advice to all of our borrowers is to lock your loan if you plan on closing within 60 days. Don’t look a gift horse in the mouth.

Today’s BEST-EXECUTION Rates 

• 30YR FIXED –  3.875% edging down to 3.75%
• FHA/VA -3.75%
• 15 YEAR FIXED –  3.125 edging down to 3.00%
• 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).

…(read more)

Mortgage Rates continued a recent trend of moderate improvement fueled indirectly by political turmoil in Europe.  The gains bring rates in line with all-time lows with some lenders priced slightly better and some priced slightly worse than than February’s record offerings.  The current rate environment is causing the longstanding “wall” at 3.875% to begin to crack.

The Conventional 30yr Fixed Best-Execution Rate is, for the first time since February, edging down to straddle 3.75% and 3.875%.  Some lenders’ rate sheets are structured such that 3.75% is clearly Best-Execution, though a majority remain at 3.875%.  But even among those lenders, 3.75% is an increasingly viable quote (read more about Best-Execution calculations)

We’re finally reaching a point of capitulation in secondary mortgage markets.  Whereas lenders have been reluctant to rely on something like European turmoil as a stable enough justification to improve rate sheets beyond recent levels, rates in the broader fixed-income market are so low that such forays into new territory are becoming a risk that’s slightly easier to manage.  

What does all that mean?  The bottom line is that mortgage-rates are several degrees of separation removed from the drama in Europe.  That drama has a very direct effect on European government debt (raising rates in the weaker countries and lowering rates in the stronger countries).  For instance, the Eurozone’s strongest economy, Germany, has seen several successive record lows on it’s sovereign debt.

US Government debt benefits from the spillover of demand for safe-haven investments focused on European government debt.  Mortgage-backed debt (“mortgage backed securities” or “MBS,” which most directly influence lenders’ rate sheets) is another degree removed from Treasuries.  

So as the chaos in Europe makes waves for its own sovereign debt, those waves are mere ripples by the time they have a chance to affect lender’s mortgage rate sheets here in the US.  This process has been going on long enough, and the waves big enough, that the aforementioned “ripples” are starting to carry us into the uncharted territory of the lowest mortgage rates in history.

You can either look at this phenomenon as extremely tenuous due to the volatile nature of the underlying cause, or you could view Europe (and particularly Greece) as being in such deep trouble that it constitutes some sort of tacit guarantee that rates will move lower still.  The latter continues to feel like a bit too big of a leap for us to take, but it’s absolutely a possibility. 

A very telling time is upon us.  We see two diametrically opposed forces pushing and pulling on mortgage rates here at these key levels.  We’ve explained the underlying structural constraints in the Secondary Mortgage Market that are largely responsible for lenders’ rates getting so sticky at 3.875% Best-Execution (in other words, the whole “hard to get much lower than this” phenomenon), though we’ve also said it CAN happen given enough time and motivation.

Now the question becomes: WILL IT HAPPEN due to the less-than-ideal motivation of “European Turmoil?”  We’d feel a whole lot better about hoping for lower rates if we were in an environment where the underlying motivation is stable and long-lasting.  But because we’ve seen big, fast, unexpected market shifts courtesy of European headlines, we have a hard time banking on the longevity of that situation.

Investors in the secondary mortgage market have demonstrated that they tend to feel the same way, having clearly avoided a quick move down into uncharted territory with respect to the “buckets” on the secondary mortgage market.  Read more about “buckets” HERE.  Without a more stable motivation for low interest rates, we’d expect ongoing progress in creating a market for even lower rates to continue to be slow and small.  

Loan Originator Perspective With Rates At All Time Lows

Aaron Meyer, First Bank Financial Centre

Despite the fact Europe is in the drivers seat helping push mortgage rates comfortably under 4% Wall St is waiting for the least bit of positive news to rally. It is conceivable to lose .125% overnight.

Ted Rood, Senior Mortgage Consultant, Wintrust

As we’ve been saying for some time, it’s all about Europe and it’s just getting worse (for them), meaning better rates for the US mortgage markets. Still locking most loans, but this rally has legs, don’t fear imminent pricing increases.

Kent Mikkola, M&M Mortgage

Lender submissions increase when we are at all time lows.  When submissions increase dramatically, lender turn times increase or they increase their rates to slow submissions.

Jason York, Vice President of VA Operations at Prime Mortgage Lending, Inc

It’s getting harder not to lock when you have a customer that is in a position to be able to lock. There seems to be a tough ceiling to crack for MBS, and even though we seem to be getting better, lenders seem reluctant to pass along pricing that should correspond to the levels we are at. MBS might be having a good day, but lenders might open up with pricing that is worse then the day before. Take what you can get, before you lose what you have!

Victor Burek at Benchmark Mortgage

Today’s rate sheets are as good as any we have ever seen. That said, there is very little benefit for consumers to float in this market. If more bad news continues from across the pond, rates might stubbornly inch lower, but any good news will unwind this rate improvement very quickly. Always remember, rates rise much faster then they ever fall.

Today’s BEST-EXECUTION Rates 

• 30YR FIXED –  3.875% edging down to 3.75%
• FHA/VA -3.75%
• 15 YEAR FIXED –  3.125 edging down to 3.00%
• 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).

…(read more)

Mortgage Rates improved moderately today as European turmoil continues to benefit domestic interest rates.  Yesterday’s late news of a $2 bln trading loss at JP Morgan also contributed to the overnight gains in broader bond markets, but it has been lingering uncertainty about the European situation that allows rates markets to hold steady at lower levels.   Many lenders are back in line with some of their lowest rate sheets ever, though none are noticeably better.

The Conventional 30yr Fixed Best-Execution Rate is well-established at 3.875% (read more about Best-Execution calculations), and some of the most aggressive lenders in the marketplace may be able to offer competitive scenarios at 3.75% for the most ideally situated borrowers.  That said, there will continue to be diminishing returns for buying rates down under 3.875% until things change in the Secondary Mortgage Market.

A very telling time is upon us.  We see two diametrically opposed forces pushing and pulling on mortgage rates here at these key levels.  We’ve explained the underlying structural constraints in the Secondary Mortgage Market that are largely responsible for lenders’ rates getting so sticky at 3.875% Best-Execution (in other words, the whole “hard to get much lower than this” phenomenon), though we’ve also said it CAN happen given enough time and motivation.

Now the question becomes: WILL IT HAPPEN due to the less-than-ideal motivation of “European Turmoil?”  We’d feel a whole lot better about hoping for lower rates if we were in an environment where the underlying motivation is stable and long-lasting.  But because we’ve seen big, fast, unexpected market shifts courtesy of European headlines, we have a hard time banking on the longevity of that situation.

Investors in the secondary mortgage market have demonstrated that they tend to feel the same way, having clearly avoided a quick move down into uncharted territory with respect to the “buckets” on the secondary mortgage market.  Read more about “buckets” HERE.  Without a more stable motivation for low interest rates, we’d expect ongoing progress in creating a market for even lower rates to continue to be slow and small.  

Loan Originator Perspective

Jason Zimmer, President, Parlay Mortgage & Property

With rates as low as they currently are, I have been advising all clients to lock if they plan on closing their loan within the next 60 days. The cost to lock for the extra 30 days is definitely worth it to secure these extremely low rates.

Ted Rood, Senior Mortgage Consultant, Wintrust

It’s all about Europe, and the band aids being applied daily. No resolution anytime soon, no stock market rally pending, hence no dramatic rate changes for the near future.  That said, I’d rather have one in the hand than two in the bush!  Rates are awesome… Take the money and run!

Kent Mikkola, M&M Mortgage

One thing to ask is if the lender has a float down or renegotiation policy.  If they do, there is absolutely no reason to float you loan currently. 

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).

…(read more)

Mortgage Rates were generally unchanged today, keeping them near their recent and all-time lows.  Lately, mortgage rates have been holding increasingly steady despite fluctuations in US Treasuries.  That’s mostly been a frustration for rate watchers who’ve seen Treasuries creep lower while mortgage rates have not.  But the tables turned today as Treasuries moved back in the other direction while the underlying MBS markets (“mortgage backed securities” which most directly influence mortgage rates) held relatively steady.

This keeps the Conventional 30yr Fixed Best-Execution Rate at 3.875% (read more about Best-Execution calculations). Some of the most aggressive lenders in the marketplace are getting close to offering competitive scenarios at 3.75% for the most ideally situated borrowers, but in general, there will continue to be diminishing returns for buying rates down under 3.875% until things change in the Secondary Mortgage Market.

We explained more about what that change entails in recent discussions about MBS and the structure of the secondary mortgage market.  Here’s a clip from yesterday’s commentary:

3.875% is the lowest rate that fits into the most popular MBS bucket (more on buckets HERE).  The next bucket lower is, by comparison, scary, untested, unproven, dangerous, unknown, and risky as far as investors are concerned.  Just like you pay more for limited-edition-type items, it’s more expensive to get a mortgage that’s produced in lower quantities.   

The diminishing returns under 3.875% can change over time, but the process isn’t a fast one, nor was it fast the last time the secondary market moved down to congregate at the next lower “bucket.”  Last time, the move was from 4.0% buckets to 3.5%, and just happened in the last 6 months.  The next move down (to 3.0% buckets) would be more gradual and might not fully happen at all unless broader bond markets hold at current levels.

It’s tough to confidently assume that bond markets will be able to hold current levels because European turmoil is a key factor in getting rates as low as they are.  Thus it’s tough for investors to assume that it’s a good idea to move down to a lower MBS bucket, making it tough for rates to move decidedly lower than they are right now.

Another consideration in the phenomenon of rates having an increasingly tough time moving lower from current levels is that lenders can use their rate sheets to pace the influx of new applications.  If they’re busy, they can raise rates simply to catch their breath.  One Senior Loan Officer from a large regional bank spoke with us on the condition of anonymity, saying “While purchase mortgage transactions are not being impacted, capacity issues are cramping rates at regional banks. Rate throttling to control production is pushing refinance rates back to the 4.0 to 4.125%.”

Loan Originator Perspective

Jason York, Vice President of VA Operations at Prime Mortgage Lending, Inc

For those customers that are within 30 days of their closing, and are content with their rate, I am leaning towards locking most of the time. If someone is outside of that timeframe, or hasn’t gotten all of their docs in, then I tend to hold off until we are within 30 days or at least have everything submitted.

Constantine Floropoulos, Quontic Bank, VP, Sr. Loan Officer

Feels like the last few days have confirmed that the market is not ready for a leg down in best execution rates, regardless of what consumers and originators may want, the market is saying NO!

Alan Craft, Loan officer at Integrity Home Loan of Central Florida

I see no reason not to lock in right now.  Rates are at all time lows.  I feel it is very unlikely that rates can go lower from here.

Curt Sandfort, President of Premier Home Loans

At these prices, I am recommending that we lock clients upon receipt of signed application. Even though that means paying for longer lock periods, IMO, it is well worth it.

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).

…(read more)