Mortgage rates moved lower again today, making this the 7th straight day where rates have either held steady or improved. Over that time, no single day stands out as clearly better than the others. Instead, the gains have been slow, steady, and varied by lender to a greater degree than normal. Despite the slow and steady pace, the improvement has been meaningful. Not only are today's rates the lowest in more than three weeks, they also bring 3.875% back into the picture as the most prevalently-quoted conventional 30yr fixed rate. That said, there are still quite a few lenders at 4.0%.
If things continue to improve, 3.75% will come even faster. This has to do with the structure of the mortgage-backed-securities (MBS) market, upon which lenders' rate sheets are based. When a loan is written at 4.0% and 3.875% to a lesser extent, there are few funding options for the lender in terms of what they do with the loan when they sell it or service it behind the scenes. There are more flexibilities once a loan is written at 3.75%. That means bond markets don't have to improve as much in order for lenders' rates to drop another eighth of a point.
That's the optimistic scenario though. Let's discuss the cautious scenario. This is the one where I remind you that any time financial markets do one thing for several consecutive days, odds increase exponentially that they'll do something different soon. As such, it's highly likely that we'll see at least a temporary pull-back from the past 7 days of positivity.
It remains to be seen if that's a storm to be weathered or a turning point that leads back to higher rates. In all likelihood, the next dose of near-term momentum will be decided by the important calendar events in the upcoming week. It continues to be the case that the risk of a bigger move higher in rates outweighs the reward that would result from further improvements. For what it's worth though, that's a much closer call than it was a few weeks ago.
Read more here: http://www.mortgagenewsdaily.com/consumer_rates/476213.aspx