Mortgage rates continued slightly higher into 3-Month Highs today.  Movement in the mortgage market depends on many factors, but one of the most important for any market is liquidity.  This is most simply thought of as the presence of buyers and sellers interested in trading at similar prices.  The more of those buyers and sellers, and the more they see eye to eye on what prices should be, the more 'liquidity.' 

With that in mind, there is no liquidity during these holiday weeks.  That's been especially true of this week where Christmas fell on a Wednesday.  That made today a sort of unofficial holiday and the effect on market conditions isn't likely to change tomorrow. Things might be just slightly more busy if tomorrow was the last chance to trade in 2013, but there will be 2 days for that next week.

The point to all this is that the lack of participation indirectly hurts rates.  It's not that trading levels in bond markets are much worse today.  In fact, the mortgage-backed-securities that most directly influence rates (MBS) are slightly improved.  But when lenders can't be assured of finding willing buyers for the loans they're originating, they're forced to raise margins to account for that risk, thus pushing rates higher.

This isn't likely to change until at least next week and more certainly, the week after that.  Between now and then, there will be a certain randomness to market movements that's not often seen outside the holidays and an ongoing upward pressure on rates, albeit small in the big picture.

Rates only rose the equivalent of roughly 0.02 to 0.03% today, but most of that change would be seen in the form of higher prices for Tuesday's rate quotes.  That means the most prevalently quoted rate for ideal, conforming 30yr Fixed loans is still 4.625% (best-execution) with  4.75% as close as it's been since early September.

Loan Originator Perspectives

"Flat day today as borrowers, loan officers, and bond investors ponder their Christmas gifts and plans for 2014. Not surprising that new loan origination is at a multi-year low. Among the less than exciting news of the day, the 10 year treasury yield reached 3.0%, the highest since early September. We'll hope it recovers once Dec employment and spending data hit." -Ted Rood, Senior Originator, Wintrust Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 4.625%
  
• FHA/VA - 4.25%
  
• 15 YEAR FIXED -  3.5%
  
• 5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

• The prospect of the Fed reducing its asset purchases weighed heavy on interest rates for the 2nd half of 2013, causing volatility and generally pervasive upward movement.
  
• Tapering ultimately happened on December 18th, 2013.  Markets had done so much to come to terms with it ahead of time that it essentially just confirmed the the 6 month move higher in rates, but didn't make for another immediate spike higher.
• That said, we should assume that we're still in a rising rate environment on average.
• NOTE: Lenders will be adjust rate sheets at various times in December and January to account for the most recent hike in Guarantee Fees.  This will unequivocally raise rates by at least an eighth of a percent for almost every borrower, and in most cases .25-.375%.  Depending on the lender, those changes will take place overnight and have already begun.
• (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).