Mortgage rates fell hard today, further extending an already impressive move lower over the course of the week. Improvements accelerated throughout the week, culminating in a decisive move back to 3.5% best execution (what is this?) for 30yr Fixed loans. Nearly all of the rally can be ascribed directly or indirectly to the employment data that began coming out on Wednesday. Today's report was by far the biggest and so the market movement matched.
Had it not been for the past two days of gains, today would have been the single best day for rates since the Fed announced its MBS buying program. The fact that rates improved quickly for three days in row, in some way masks the overall gravity of the week, which in fact, is the best week for mortgage rates since June 2012. If this all seems "a bit sudden," it is. Tonight's MBS Commentary on Mortgage News Daily explains why:
"Markets were partly deceived by an overabundance of attention being paid to Cyprus, when in fact it was Italy that has been and still is the bigger deal as far as systemic Eurozone risk is concerned. That realization worked its way through markets last Wednesday, and we were then left with an eerie silence, not quite sure what to expect after the long holiday weekend. Europe was out until Tuesday, and when they got back in, we not only heard that it would be 10 days before any substantive news from Italy was even possible, but we also saw that European markets didn't have much else to say. Things stayed unbelievable flat through Tuesday and it dawned on us (and probably a lot of other market participants) that all we had coming up were several big pieces of employment data, culminating with the biggest this morning.
Recall that a huge reason for mortgage market weakness so far in 2013 has been the adjustment of Fed buying expectations. These three days of crummy labor market indicators have served as the cold bucket of water for the red hot ingot that has been mortgage underperformance in 2013. You know how that blacksmith stuff works? Big sizzle noise, lots of steam, and voila! Expectations for Fed MBS buying have been tempered! The fact that bond markets were caught a bit offsides on Wednesday morning helped fuel the sense of abruptness as well. There's still some chance that this was all just an epic cleansing process of trading positions that were betting too heavily on higher rates, but we'll need a few more days of reaction to start assessing that possibility. For now, this is only the first day since early December that rates have truly challenged their long-term uptrend."
Loan Originator Perspectives
"Today's remarkably poor March NFP report helped MBS continue this week's rally. Rates and pricing both improved, to the delight of borrowers and loan officers. My current clients at 4% and above have a great opportunity to save again, especially since we're usually able to pay their costs. Don't see the rally fading in next few days, but if we're within 30 days of closing, will probably lock loans if we have the pricing we need to pay our borrowers' costs." -Ted Rood, Senior Originator, Wintrust Mortgage
"Lots of rate consumers like to "hold for lower" and that's proven painful in 2013. Until this week anyway. So when we have a single week where rates drop a full .25% and we're now within .125% of all-time record lows, those folks would be wise to pat themselves on the back and lock their loans. These dips are rarer than casual market observers (aka rate consumers) realize. And you can't brag to all your friends about calling the bottom for rates unless you actually capture the bottom with a rate lock." -Julian Hebron, Branch Manager, RPM Mortgage
"Well well. Thanks to the reality of a poor labor market rates are coming down. We may be seeing a move back to fall 2012 rates. Wouldn't that be nice? Still locking today is not a bad choice. Might see some of the gains given back so don't be gun shy. " -Mike Owens, Partner, Horizon Financial Inc.
"A swing and a MISS! Time to re-evaluate our rate outlook...nah, not really, rates are good---they have been okay, were great. You like, you lock. Locking is the easy part. Concentrate on closing!" -Bob Van Gilder, Finance One Mortgage
"Tide continues to shift away from risk as most economic reports have shown our economy slowing. Lenders have passed along some of the gains but still plenty of cushion in my opinion. I have never been a fan of locking on Fridays so if you floated through this mornings report, i would keep floating til Monday." -Victor Burek, Open Mortgage.
Today's Best-Execution Rates
- 30YR FIXED - 3.5%
- FHA/VA - 3.25% (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 have risen moderately but consistently since hitting their all-time lows in September and October 2012.
- Regardless of global or domestic economic weakness, the subsiding fear of a disorderly EU breakup will continue to prevent rates from getting back to those lows.
- This is very likely to be the case unless a similarly panic-inducing event were to come into focus, or if a disorderly break-up regained the spotlight.
- Sequestration, negative growth, and generally choppy political and economic environments around the world DO NOT constitute that sort of panic.
- This is a "rising rate environment" until further notice, though pockets of recovery and consolidation can provide smaller-scale opportunities against the larger-scale backdrop.
- (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).