Mortgage Rates fell sharply today after the Minutes from the latest Fed meeting revealed a strong level of commitment toward additional monetary accommodation in the near future.  Several of the Fed's potential accommodation methods would have a default positive impact on bond markets, generally helping to keep rates lower.  Although markets had a good amount of this expectation already priced in to current levels, today's Minutes served as a reminder of sorts, that they were on the right track.  

This isn't the one event that undoes the recent weakness in bond markets and recently higher interest rates, but of any single piece of news or data since late July, today's FOMC Minutes have done the most to push back against rising rates over the past 3-4 weeks.  Best-Execution for 30yr Fixed Conventional Loans fell sharply, and some mortgage rate watchers may find they can more easily move down to the next .125% tier lower in rate.  If not, there will be substantial cost reductions for whatever rate you were quoted yesterday. 

(Read More:What is A Best-Execution Mortgage Rate?)

It's very hard NOT to feel like some sort of ground has been held or some sort of shift has occurred.  If we look at 10yr yields (although not responsible for mortgage rates, they're the best indicator for the broader interest rate markets and more indicative of shifting trends when markets make significant moves), we see several recent "bounces" at 1.86, and a subsequent stair-stepping movement back to 1.69% at the moment throughout the day.  The moves occurred in high volume and brought in multiple classes of investors both to close out previous bets on higher rates and make new bets on lower rates.

It's also very hard for us to jump head-first back into more risk-tolerant waters after enduring the last 3-4 weeks.  If you don't end up locking your loan today out of sheer relief that you retrieved a portion of recent losses, we'd definitely keep our guard up in the coming days.  Early September will ultimately be when the biggest movement higher or lower is confirmed.

Long Term Guidance: We'd continue to advocate against trying to "get ahead" of current market movements due to the high degree of uncertainty.  The long-term direction of rates has been down, down, down, for the past year.  At some point, this will turn, and when it does, we highly recommend that you're prepared by drawing your OWN line in the sand as to how much rates would have to rise before you lock at a lost.  That's assuming you don't simply lock as soon as you're able.  For those with lower levels of risk tolerance who would consider movements in cost (despite unchanged interest rates) to be significant, or for those within 15 days of closing, or who are purchasing, this certainly favors locking.  We'd also consider that rates remain very close to all-time lows and uncertainty to all-time highs.  This also favors locking.

Loan Originator Perspectives

Mike Owens, Partner with HorizonFinancial, Inc.

I'm still in lock mode.   We're happy to see rates dip back down, but that's the point, be happy.   If QE3 is announced, stocks will take off and bonds could get left behind.    This pushes rates back up.    We may see more gains short term, but I see this as a chance to lock if you missed out before.   Some lenders have still not dipped to where they were before.

Bob Van Gilder (BVG), Finance One Mortgage

Patience, ding, ding, ding. Ring any bells?  Don't get greedy. Rates always go up 1)Faster than down 2)When you least expect it.

Today's BEST-EXECUTION Rates 

• 30YR FIXED -  3.5% - 3.625%
  
• FHA/VA - 3.5% (varies more between lenders than conventional 30yr Fixed)
• 15 YEAR FIXED -  2.875-3.00%
• 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
• 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).