Mortgage Rates were paradoxically higher today giving some pause to a bounce back from the month's highest rates last week.  Although not altogether uncommon, today's mortgage rate landscape is slightly counterintuitive in the sense that Treasuries and even underlying MBS (the "mortgage-backed-securities" that most directly influence mortgage rates) have been in marginally improved territory most of the day (improved = lower rates). 

That said, the changes in market levels versus Friday afternoon are minimal, and there are several common reasons that lenders occasionally raise their rates despite steady or improving market conditions.  We gave this a more detailed treatment last year: IN THIS POST.

Of particular note in the current environment is the topic of "capacity constraints."  As rates improved slightly on Friday, the level of activity increased sharply on the secondary mortgage market as lenders committed a surprisingly high amount of new loans to the pipeline, right in the prevailing rate range.  This often signifies that lenders received lock requests from originators and clients, or expect them in the near future.

Either way, we know lenders have been and continue to be extremely busy.  In fact, capacity constraints are exerting some of their greatest ever influence over day-to-day changes in mortgage rates.  If rates were based purely on MBS, rates would be slightly lower today, but today is one of those days where we can see how stretched lender capacity (considering there's plenty of demand at current levels, at least for now) is dragging "up" mortgage rates.  Even so, best-execution rates remained at 3.5% with only minimal increases to the borrowing costs associated with prevailing rates.

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

Long Term Guidance: We'd continue to advocate against trying to "get ahead" of current market movements due to the high degree of uncertainty.  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.  For those with longer timelines, less urgency to refinance, or wider ranges of risk tolerance, we'd note the generally "depressed" rate environment due to the European crisis and simply keep our eyes peeled for the major changes in European policy that result in noticeable changes in Best-Execution mortgage rates (i.e. the actual quoted RATE is moving as opposed to simply the COST).  In either scenario, we'd consider that rates remain very close to all-time lows.

Loan Originator Perspectives

Ted Rood, Wintrust Mortgage

Lender rates were higher today despite no drop from Friday's mortgage backed securities' prices. Reminds me of when gas goes up 20 cents for no apparent reason at EVERY gas station. Several lenders have since repriced for the better, guess they decided to buy a little loan volume while their competitors were hoping for the extra profit regardless of market circumstances.

Today's BEST-EXECUTION Rates 

• 30YR FIXED -  3.5%
  
• FHA/VA - 3.375%-3.5% (varies more between lenders than conventional 30yr Fixed)
• 15 YEAR FIXED -  2.75 - 2.875%
• 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).