Mortgage Rates improved marginally from yesterday's new all-time lows.  Without any major scheduled events to digest, bond markets were left to their own devices and paid a decent amount of attention to a sell-off in stocks.  When yields in the broader bond markets move lower, MBS (the "mortgage-backed securities" that most directly influence lenders' rates) tend to move lower in yield as well, allowing lenders to off lower costs, lower rates, or a combination of the two.

With the recent move lower to a 3.75% Best-Execution level for 30yr Fixed Conventional loans, today's improvements were seen more in the form of decreased borrowing costs, or increased lender credit, as the case may be.  If you're a first-time or even frequent reader looking for a bit more clarity on "best-execution," we just updated the background page: What is A Best-Execution Mortgage Rate? 

For a long time, 3.875% had been "the wall" for Best-Execution mortgage rates.  We'd seen fleeting moments of 3.75% on a few days in late January and early February, but nothing sustainable.  That makes today record-breaking, in the sense that we're now in the longest stretch of consecutive days with a 3.75% Best-Execution rate for 30yr Fixed Conventional loans.

One of the reasons for the long-standing "wall" was/is the structure of the mortgage-backed-securities market.  We've talked extensively about "buckets" in the past (read more HERE) and the difficulties associated with getting newer and lower buckets 'open for business' is at the core of this structural problem.  Recent market movements driven by Euro-zone panic and increased possibilities of further Fed stimulus have been persistent enough as to increase the water-level in that previously relatively empty bucket.  It's a slow process to fill it, and will continue to be, but it has been happening piece by piece.

Here's the important point of this discussion: That bucket has to CONTINUE to be a safe and logical place for investors to keep their metaphorical 'water,' and that phenomenon relies on European panic generally remaining high and the domestic economy generally moving sideways to backwards as opposed to progressing slowly.  This CAN happen, and rates could move even lower as a result.  Even without 10yr yields moving lower, mortgage rates could benefit simply from some assurance that other interest rates have reason to stay where they are.  

Whether or not that's a risk worth waiting for is less certain.  Forced to rely mostly on past precedent, and to some extent in the assumptions about the structure of the mortgage market, we CAN BE reasonably sure that given an ideal interest rate scenario, mortgage rates will not move lower at this point as fast as they would move higher given merely a moderately negative scenario.  In other words, we're definitely not ruling out further improvement, but we are making not that there has been and will continue to be diminishing returns on the risk of waiting for it.

Loan Originator Perspective With Rates At All Time Lows

Brett Boyke, Senior Mortgage Banker, Wintrust Mortgage

From past experience this is a nervous time for both borrowers and loan officers - when rates are on the precipice of breaking new lows, borrowers are nervous about locking in to early in fear of missing out on a better rate/fee combo. Conversely, loan officers can't know for sure if this type of move is a flash in the pan or the beginning of a sustained march lower. Thus making our jobs more difficult as a trusted advisor.

Julian Hebron Branch Manager, Loan Agent,  RPM Mortgage

We're near the low but Treasury techs suggest a few ticks lower for MBS and rates is possible. The "when" is harder to determine. Consumers can't go wrong with current record lows but if you're going to wait, at least study the Refi Roadmap now so you can avoid surprises

Mike Owens, Partner with HorizonFinancial, Inc.

I've always been a lock it and play it safe originator, but right now I'm 50/50. Rates just keep edging down and I'm actually going to floating short term just to see what plays out. The lock trigger is ready in case, but floating seems safe for now.

Bob Van Gilder, Originator, Finance One

It is the best time in history to take advantage of unprecedented low mortgage interest rates.  Some think, "I'll wait, rates will go lower." That kind of thinking often results in missing out. If you like what you are being quoted by a reputable professional, take it! And remember, patience is key in this new Lending environment.

Matt Hodges Loan Officer,  Presidential Mortgage Group

I've said it before - if you have an attractive offered rate which improves your situation like lowering your payment significantly or provides some cash out for renovations, take it and don't look back. Chasing the bottom of the rates is a losing proposition. You might get lucky, but at all time lows, chances are better that you will end up with a higher rate than you hoped.

Ted Rood, Senior Mortgage Consultant, Wintrust

Bought some gas here yesterday at $3.47. Crude continues to drop, yet gas is $3.69 today. Lesson here is that user prices for both mortgages and gas don't always behave logically. If you've got pricing you're happy with, take the money and run!

Victor Burek, Mortgage Planner, Benchmark Mortgage

With mortgage rates at these levels, how can you not lock? Rates have held at these levels for a few days and pressure is building. If the pressure gives and rates move higher, they will move higher very quickly. Many consumers want to lock at the rock bottom, but one very large problem with that is you don't know the bottom is here until it is gone, then its too late.

Today's BEST-EXECUTION Rates 

• 30YR FIXED -  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).
  

Mortgage Rates hit new all-time lows today.  In most cases, lenders' offerings are just slightly better across the board than they were in late January, the last time we officially noted "new all-time lows," though some lenders are not quite back to their previous best levels.  A much weaker-than-expected reading on a widely followed report on business conditions in the mid-Atlantic region gave rates markets a bit of an early jolt lower.  From there, an absence of additional data gave way to technical momentum, helping rates even lower.

Markets are facing tremendous uncertainty over the eventual outcome of Greek elections in June as well as the fate of the Spanish banking sector.  Today, Spain saw their own version of the "run on banks" that occurred in Greece yesterday, reminding traders that, even if Greece makes it out of this mess still in the Euro-zone, that there are bigger fish to fry.  

All that uncertainty has investors piling into safe-haven assets.  In a global economy where a currency as massive as the Euro is in serious trouble due to problems in one small Euro-zone country, investors are just looking for a safe place to park their assets.  US Treasuries have been one such place and their recent rally benefits other products in that same medicine cabinet, such as MBS (the "mortgage backed securities" that most directly influence rates).

Apart from Europe, there's also the consideration of Fed policy in the US.  Whether or not the Fed extends recent quantitative easing measures or embarks on new ones is a matter of great concern to bond markets.  At the last policy announcement, the door was left open for additional easing as-needed, and yesterday's "minutes" from that policy meeting essentially confirmed that open door.  Markets perceive that "as needed" bit as becoming more and more "needed" if the Fed sees signs in the domestic economy like the one seen this morning's weak data.  So when investors think the Fed is more likely to buy more fixed-income investments, rates stay low or move lower, all other things being equal. 

Any way you account for the causes, the bottom line is that mortgage rates are lower.  We'd probably say that 3.75% is the new Best-Execution for 30yr Fixed loans over the past few days and really cemented that today.  Keep in mind, of course, that while we generally think Europe will continue to weigh on markets, keeping rates fairly contained in this new, low range, that "cement" can always be broken if sufficient force is applied.  We're fond of mentioning the increasing barriers to improvement at current levels.  We don't think rates can't improve, just that it will be slow going, and with risks of periodic bounces back.  

Loan Originator Perspective With Rates At All Time Lows

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

These are the best rates we have ever seen. No reason not lock and take advantage. Is it possible they could go lower? Yes it is possible, but I feel there is a much better chance of worse than better.

Ted Rood, Senior Mortgage Consultant, Wintrust

The biggest drawback to falling rates (as we've seen for a while now) is that borrowers can be lulled into a false sense of security. It doesn't do a borrower any good to stay at a high rate with the hope of getting a new rate 1/4% better than has ever been available. In the equities market, trying to time stock prices to buy at the absolute lowest price is called "catching a falling knife", and it applies to mortgages as well. If you're at a high rate now, and can profit from a refi today, waiting costs you money since you're continuing to pay a higher rate than necessary. In my experience, catching falling knives is not a fun thing to do!

Mike Owens, Partner with HorizonFinancial, Inc.

I've always been a lock it and play it safe originator, but right now I'm 50/50. Rates just keep edging down and I'm actually going to floating short term just to see what plays out. The lock trigger is ready in case, but floating seems safe for now.

Matt Hodges Loan Officer,  Presidential Mortgage Group

The mortgage market is really intriguing right now. Rates have been in slow decline over several weeks, yet there's a persistent fear of a spike upwards with any positive news. Meanwhile, we keep wondering "Where/when will 3.5% or lower be readily available for clients with 0 points?" Volatility and volume have limited the improvements. For the time being, at 30 days or less to closing, lock bias is firmly in place.

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

With where we currently are, I am locking loans that I would typically continue to float.

Kent Mikkola, Mortgage Consultant ,  M & M Mortgage, LLC #213677

Improving rate environments tend to lull us into a false sense of security and often 1 day can wipe out the gains that were made over several weeks. As they say, "a bird in the hand..."

Jeff Statz Mortgage Advisor,  Network Funding, L.P.

Locking most now...stay vigilant for pricing to hold for FHA 6/11 Streamline changes

Today's BEST-EXECUTION Rates 

• 30YR FIXED -  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).
  

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).
  

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).
  

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).
  

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).
  

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).
  

Mortgages rates held steady for the most part today, despite relatively volatile movements in underlying markets.  Actually, the bond markets of which mortgage rates are a part, were not nearly as volatile as stock markets, although both sides were keen to react to European headlines more so than today's anticipated event, the 10yr Treasury Auction.

The moderate amount of movement left most lenders very close to yesterday's offerings.  Best-Execution for 30yr Fixed Conventional Loans remains at 3.875% with some lenders slightly increasing the borrowing costs at that right while many others had slightly decreased costs.  The net effect left our computed average unchanged day-over-day.  

Speaking of that average, at 3.88%, it's the lowest it's been in quite some time.  In fact, if you're simply looking at the 3.875% and above, rates are right in line with the all-time best offerings.  The only thing holding the average back from it's previously achieved 3.81% best, is the fact that rates of 3.75% and below are more expensive than they were the last time they were available.  

It has been and may continue to be the case that there's less "love" for those "3.75% and lower" rates due to the structure of the Mortgage-Backed-Securities (MBS) market that underlies the world of mortgage rates.  We've been talking about this more and more in recent days and can certainly appreciate that it's a complex topic in the scope of a daily interest rate update.  But it's really the only accurate way to account for the recent phenomenon of being "stuck at a 3.875% Best-Execution."

Without revisiting the more esoteric points of recent discussions (and please let us know if you need/want more explanation on anything you read here), suffice it to say that 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.  

But rates are basically in a place now where any further market improvements will cause a very slow trickle of increased availability in that "frontier zone" of the underlying MBS market.  Given that today's strength seems to draw more on European debt concerns, we're thinking investors will want to see more organic (and domestic) causes for concern before getting too comfortable with the current level of interest rates.

Tomorrow could be useful to that end.  It contains the week's highest concentration of moderate to potent economic data as well as the week's final Treasury coupon auction in the afternoon.  We're not expecting rates to shoot abruptly higher without significant motivation from Europe, but neither are we expecting them to have an easy time getting lower in the short term.

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).
  
  

Mortgages rates were able to scrape together some minor improvements today but continue to have an exceedingly tough time keeping pace with the rest of the interest rate world.  Slow-going gains aside, rates are still chipping away at some of their best levels of all-time.  We're now getting into territory where only a few days in history have seen more aggressive rate sheet offerings.

The Conventional 30yr Fixed Best-Execution Rate remains unchanged unchanged at 3.875%.  But we're starting to see some softening of the buydown costs to move to 3.75%, but this varies greatly from lender to lender.  In other words, the most aggressive lenders in the market are increasingly close to being at a 3.75% Best-Execution rate, but when considered in conjunction with the other large lenders' rate sheets, average Best-Ex isn't that close to moving down to 3.75% yet.   (read more about Best-Execution calculations). 

If Best-Ex does make it to 3.75% on average, it will be the first time in history that it has done so.  We're not necessarily expecting this to happen soon, but there's a sort of tension building in the marketplace that makes it more and more possible if current levels are held or improved upon.  This has to do not only with the low yield levels of interest rates in general, but also with the underlying MBS market.

MBS are the mortgage-backed-securities that most directly influence lenders' rates.  In order for rates to be as low as they are in the first place, loans with similar characteristics have to be pooled together to spread out risk to investors.  After all, if you invested in a single loan that defaulted, you'd lose 100% of your money even if the default rate for all similar loans was 3%.  But if you invested in 100 similar loans and the expected 3% defaulted, now you'd only lose 3%.

This oversimplified example is one of the reasons that securitization exists (the process of turning lots of little debt obligations into one bigger security).  The securitization process for mortgages divides various pools of mortgages by 0.5% differences in rate.  The bottom line is that your average plain vanilla mortgage will end up being slotted into the dominant 3.5% bucket with the next lowest option being 3.0%.

3.5% is the lowest bucket that's ever seen much water, and for several reasons that are beyond the scope of our discussion, lenders can't create new mortgages that fit into 3.0% buckets as safely as they can create 3.5%-bucket mortgages.  This then, is the main reason that 3.875% has been so darn "sticky" as the lowest stable Best-Execution rate in history.  Anything lower starts to become "3.0% bucket" material.  We talked more about this in the past HERE.

Long story short, it will take more time and more stability at low rates before the underpinnings of the MBS market can adapt to make room for those frontier buckets.  Until then, further gains are minimal and hard-fought.  

Tomorrow brings a bit of a high risk event in the form of the 10yr Treasury Note Auction.  This could help us or hurt us, but just like the recent Employment Situation Report, the extent to which a negative result could hurt us probably outpaces the extent to which a positive result would help us.

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).
  
  

Mortgages rates continue to operate at their best levels since early February following Friday's weaker-than-expected Employment Situation report.  There was effectively no change in most lenders' rate sheet offerings versus Friday morning's rates.  Even last week, there were no dramatic movements into the Employment Report, but more of a steady march toward historical lows.

This naturally leaves the 30yr Fixed Conventional Best-Execution Rate unchanged at 3.875%.  (read more about Best-Execution calculations). 

With the Jobs Report behind us, there's less by way of big-ticket "risky events" in the near future.  Economic data in the current week is limited although Treasury coupon auctions (3, 10, and 30yr maturities) will take place on Tuesday, Wednesday, and Thursday respectively.  Another consideration is the market's ongoing reaction to current political events in Europe.  Euro-zone surprises can indeed have an effect on domestic rates, but we continue to see rates having a hard time getting lower from current levels.

"Floating into the auctions, and any potential Eurozone news only creates more risk than reward with rates as low as they are" says Constantine Floropoulos, VP and Sr. Loan Officer at Quontic Bank.  "We'll need liquidity in lower coupon MBS if we're going to see a drop in Best-Execution rates...  Not an overnight process."

There's a hidden "wall" in mortgage rates created by the underlying mechanics of the MBS Market (MBS are the "mortgage-backed securities" that most directly influence rates).  As Mr. Floropolous alludes to, the next coupon lower from current levels is not very active.  Think of this like a bucket that folks are generally hesitant to place their water in.  (Read more on "buckets" HERE).

In order for this relatively empty bucket to get more water, markets would have to languish at current levels, fueled by a steady stream of negative economic data.  Andy Pada, VP at 1st 2nd Mortgage, notes "Waiting for a parade of economic horribles to occur is neither good for the soul nor is it a guarantee for a lower rate. Lock in your historically low interest rate, assess any available lender credit and be content with having executed your mortgage transaction at this time in history."

Long story short, it will take more time and more stability at low rates before the underpinnings of the MBS market can adapt to make room for those frontier buckets.  Until then, further gains are minimal and hard-fought.  For Loan Officers like Mike Owens, at HorizonFinancial, Inc, the decision is easy: "I always lock the rate. As usual I'm not a risk taker and with rates at historical lows, there is just not much incentive to float. We can float down in rate with some investors as well so that's another reason to lock."

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).