New Mortgage Rates Squash All-Time Lows

Mortage Rates July 24th 2012

Interest RatesMortgage Rates are on an undisputed tear, moving more today than any day in the past 3 weeks of progressive movement into new all-time lows. The week began much like the previous week ended, with concerns over the European financial system pulling all manner of ‘safe-haven’ bond yields lower, among them MBS (the Mortgage-Backed-Securities that most directly influence mortgage rates).

Once again, there was nothing on the domestic economic calendar and corporate earnings had little effect next to news that a third region in Spain will now request assistance from Spain’s central government. Combined with a glut of generally gloomy news overnight, 10yr Treasury yields hit new record lows before domestic trading commenced. The balance of the day has simply seen rates move in narrow, sideways patterns near these extreme levels.

Even though Friday had been fairly brisk in terms of the pace of improvement for mortgage rates, today was brisker in most cases. Best-Execution rates for 30yr Fixed, Conventional loans are a foregone conclusion at 3.5% and there’s an even stronger case for 3.375% at some lenders. That said, 3.5% continues to be a more efficient combination of rate and fee at most lenders.

We’d continue to advocate against trying to “get ahead” of current market movements due to the high degree of uncertainty. In the past, we would have interpreted that advice as a suggestion to lock, but in the recently “low and sideways” environment, it’s probably better-read as a suggestion to go with the flow of gradually lower rates until we see the pattern definitively break. It’s a reasonably safe assumption that European concerns will generally continue to apply downward pressure on rates although there are no guarantees that the right piece of news or economic event couldn’t mark “the turning point” at which rates bottom out. On any given day, rates have been at or near all-time lows and in the grand scheme of things, unable to move lower as quickly as Treasuries for example. So although there is potential gain from floating, it’s still a historically excellent time to lock if you’d prefer to take the risk off the table.

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