May 15th, 2014 1:42 PM by Jackie A. Graves
Mortgage rates kept moving lower today as European markets continued to provide an unexpectedly large boost in demand for domestic bond markets. Those markets include MBS, the mortgage-backed-securities that most directly affect mortgage rates, and higher demand pushes prices higher, which in turn makes rates lower. The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) is now centered on 4.125%. Some borrowers will see the improvements in the form of lower closing costs or higher lender credits. In terms of effective rates, that drop in closing cost equates to a drop of 0.02%.
We discussed the importance of yesterday's market movements in that it was the first clear instance of the broader US bond market breaking its contained 2014 range. For instance, 10yr Treasury yields hadn't been below 2.57 at all this year, but fell to 2.525 at their lowest levels yesterday, and moved lower to 2.473 today. This consecutive move into even lower levels is consistent with the "range break" theme that we referred to yesterday as a positive development in the bigger picture.
While Treasuries don't dictate mortgage rates directly, their trends are almost always moving in the same direction. The mortgage market did a pretty good job of keeping pace with this big move in Treasuries earlier in the day, but faded somewhat in the afternoon. Lenders' best rate sheets were seen this morning, with almost all of them repricing to higher rates in the afternoon. Even after those reprices, rates are still lower than yesterday.