Mortgage rates fell noticeably today, keeping alive an impressive streak of 13 days without higher rates. Three out of those 13 have been 'unchanged,' yesterday being one of them. There was a chance this marked a shift in the positive momentum, but financial markets were quick to get back on the 'lower rates' bandwagon when it began rolling again this morning. Conforming, 30yr Fixed rates moved down to 4.25% (best-execution) for most lenders, a level not seen since June 19th. A decent amount of lenders remain at 4.375% while others have reasonable buydowns to 4.125%, depending on your scenario and personal preference.
Today's positivity was made possible by a team effort of market movers. Although it is one of the least significant of the bunch, Italian political and economic turmoil pushed investors toward safer-haven debt such as US Treasuries. This helped Treasuries hold their ground overnight and helped MBS (the "mortgage-backed-securities" that most directly influence mortgage rates) begin the day in slightly positive territory (positive = higher prices = lower rates).
More significant was the weak economic data in the form of the worst read on Consumer Sentiment since April just before 10am. Bond markets, including MBS, hadn't done much until then, but had a green light for further gains afterward. Debt-Ceiling drama kept the tone supportive into the afternoon. This might be slightly counterintuitive considering one of the supposed consequences of a violation of the debt ceiling is an inability for the US to "pay its bills." The thinking is that if the US defaults on its debt that rates would quickly rise.
Those participating in reality know that the US isn't going to default on its debt in the near term future and that most of these theories are perpetuated by incessant political posturing. The more realistic victim here is the US economy, and lower rates are a very natural consequence of economic weakness. This is usually true in general, but doubly true right now as market participants are keen to observe any meaningful shifts in economic data that might offer clues as to how the Federal Reserve will proceed with it's bond buying program (QE3).
That's important for rates because the steady flow of stimulus from QE3 is a key factor in the historically low rates of the past 2 years, and it was the threat that the flow would be disrupted or abated that sent rates moving so quickly higher in May. The most important clue of any given month arrives next week with the Employment Situation Report on Friday. That said, if the government shut-down actually happens, that report will be delayed until the following week.
Loan Originator Perspectives
"Great way to end the week, with bonds rallying. Just about every
lender did reprice today and the rate sheets that I have seen are the
best in a long time. I think next week we give back some of these gains
going into non farm payrolls, but I am sticking with my same guidance.
If you are within 15 days of closing, lock today. Longer term closings
could probably float til next week, but with the gains today there is
nothing wrong with locking." -Victor Burek, Open Mortgage
"Look like the "Friendly Friday" trend continues. Mortgage rates ever so
slightly better than yesterday. Why not take advantage of some of the
lowest rates within last three months?" -Bob Van Gilder, Finance One Mortgage
"Yesterday's moderate weakness is now a distant memory as rate markets
logged nice gains at week end. Positive lender reprices were common
throughout the day, and for the week we gained over 100 bps in loan
pricing. The trend remains our friend, have to wonder if markets agree
with the Fed that the economy is indeed far from robust. Should be a
happy weekend for home shoppers, rates best they're been in over 2
months." -Ted Rood, Senior Originator, Wintrust Mortgage
"Another good day and overall week for rate watchers. Next weeks jobs report will be undoubtedly the difference maker to this rally. Until then be weary of secondary traders hedging for a worst cast scenario report, potential tape bombs, and pipeline control. Fridays are not typically lock days, but with rates at 3 month lows, and considering what we dealt with from June to date, borrowers may need to lock depending on their time frame to close. Proceed with caution." -Constantine Floropoulos, Quontic Bank
"I think we are in nice rally at least until the run up to the jobs number. With shutdown uncertainty and fed fears put to the side for a while there is no reason not to float a day or two and try to get to 4.25%." -Chris Marconi VP Residential Lending First Midwest Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.25%
- FHA/VA - 4.0-4.25%
- 15 YEAR FIXED - 3.375-3.5%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
- Expectations for "tapering" (a reduction in "QE3" asset purchases) mounted over the summer and September 18th was seen as the most likely day for a potential tapering announcement
- But the Fed decided to keep a change in QE amounts on hold until the economy could more convincingly show that rising rates (which had been rising because markets expected the Fed to taper!) wouldn't be too big an impediment to further improvement.
- That's resulted in the first meaningful "pause" in the "rising rate environment" since it began in earnest in May, 2013. This won't necessarily be an ongoing move in the other direction, and we're nowhere near May's rates yet, but it's a good opportunity to get back in the market if rising rates pushed you out sometime between now and then.
- The extent to which that remains true relies on incoming economic data. Strong data will increase the speculation that the next Fed meeting will contain a reduction in purchases
- (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).