Mortgage rates were convincingly higher today, continuing last week's move toward the levels not seen in over two years.  Those levels were reached by some lenders today as they rose above July 5th's highs, while others aren't quite there yet.  On average, today's rates are slightly higher than July 5th, but only by a small margin.  30yr Fixed best-execution was already up to 4.75 on Friday and some lenders moved into 4.875 territory today. 

As we discussed on Friday, markets continue to take a defensive stance against the prospect of the Fed reducing the pace of their asset purchases.  As investors withdraw from bond markets, the prices of mortgage-backed-securities (MBS) fall, forcing lenders to offer higher rates.  The combination of the Fed asset-buying speculation, seasonal absences among market participants, and debate over the next Fed Chair nomination is creating a very uncertain environment where traders are more apt to trade according the momentum.  One analogy is that it's easier to go with the flow of the current than to swim against it. 

That's essentially what's making this run higher in rates seem so effortless and incidental over the past two days.  That also makes it hard to know where the current ultimately leads.  It could be that rates have further to rise  before they level-off again or that they would have already leveled-off if not for those environmental factors that advocate uncertainty.  The next big opportunity to shed light on this question arrives on Wednesday afternoon when we get the Minutes from the July 31st Fed meeting.  Everything between now and then is potentially risky.

Loan Originator Perspectives

"Another day, another set of higher rate sheets and round of PM lender price worsens. Sound like a broken record at this point, but we are in a rising interest rate environment, and any temporary lulls don't indicate otherwise. Any borrowers fantasizing about July's pricing need to be realistic, what matters is the future, not the past, and the future is higher rates." -Ted Rood, Senior Originator, Wintrust Mortgage

"Very little economic data today and rates continue to rise. We are still advising to lock in at application as we see nothing on the horizon that indicates a reversal of the current uptrend." -Alan Craft, Branch Manager, Prime Mortgage Lending

"Lock when you can because waiting for a dip in rates will take a lifetime most likely. Lock when the quote is given for a refinance and when a contract is in hand or even verbally agreed to on a purchase. 5% here we come. Sub 4% never coming back. Reality is coming into picture and the last 12-18 months of super low pre May 2013 rates is a bad dream at this point." -Mike Owens, Partner, Horizon Financial Inc

"Total breakdown of recent technical support levels leave us in a high risk scenario until the market decides the selling is overdone. With uncertainty in the timeline of FED tapering and a few weeks before the major employment report we can see this continue to drag out. Although yields have jumped substantially over the last week, inevitably the market will trade back down....I would hold off on locking today as the market should give something back over the next few days....Nonetheless, the consensus is to lock at origination." -Constantine Floropoulos, Quontic Bank


Today's Best-Execution Rates

  • 30YR FIXED - 4.75%-4.875%
  • FHA/VA - 4.25% or 4.75%
  • 15 YEAR FIXED -  3.75%-3.875%
  • 5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

  • After rising consistently from all-time lows in September and October 2012, rates challenged the long term trend higher, but failed to sustain a breakout
  • Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
  • Fears about the Fed's bond-buying intentions were proven well-founded on May 22nd when rates rose to 1yr highs after the Fed indicated their intention to taper bond buying programs sooner vs later
  • The June 19th FOMC Statement and Press Conference confirmed the suspicions.  Although tapering wasn't announced, the Fed made no move to counter the notion that they will decrease bond buying soon if the economic trajectory continues
  • Rates Markets "broke down" following that, as traders realized just how much buy-in there was to the ongoing presence of QE.  These convulsions led to one of the fastest moves higher in the history of mortgage rates and market participants have not been eager to be the among the first explorers to head back into lower rate territory until they're sure they'll have some company.
  • (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario.  There are many reasons a quoted rate may differ from 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).