Mortgage rates moved higher today, perfectly erasing yesterday's solid gains on average.  Movement continues to be only moderate in the big picture and hasn't yet affected the most prevalently-quoted rate of 4.625% for ideal, conforming 30yr Fixed loans (best-execution).  That means both yesterday and today's moves would be in the form of closing costs for most borrowers.

Today's weakness was priced in to the first rate sheets of the day following a stronger than expected employment report from ADP.  While the upcoming Employment Situation report on Friday is the biggest consideration for rates, the ADP report is the most closely correlated early indicator.  While this never guarantees the outcome of Friday's report, it can certainly nudge the forecast in one direction or the other, and that's enough for markets to trade on. 

In fact, the 5 minutes following the ADP data was the most active in 2014 so far, and by a wide margin at that.  That is a valuable albeit logical clue as the the significance of Friday's report.  As was the case with today's, it too has the potential to move rates in either direction, except on Friday, the risk and reward is much bigger.

Loan Originator Perspectives

"All of the gains over the last couple days have been wiped out today following the better than expected ADP jobs report. It isn't all that bad, as lender pricing didn't take a huge hit...yet anyway. As of the time this was written no lender has repriced worse but it is definitely possible at any time. Like yesterday, I advise locking now before the jobs data on Friday." -Victor Burek, Open Mortgage

"All good things must come to an end, and they did in rate markets today as we lost much of the week's earlier gains. ADP's December employment projection beat forecasts, leading investors to expect a strong NFP report on Friday. We did get the good news that projected cost increases from Fannie and Freddie for most borrowers are officially on hold pending further study. Improvement in mortgage rates is fleeting these days; the trend is towards higher, not lower rates. Until economic/political drama reappears in earnest, that's not likely to change." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage

"You win some and lose some. We gained a little earlier this week only to give it all back today. Therefore, my bias going forward will be to lock at application. Floating is really asking for the offer you got to be better than the locked deal you end up with. Rates are NOT going down without some kind of Titanic event in the economy. At this point even a significant stock market correction doesn't look like it will help as that money will go into cash instead of bonds. -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc. NMLS # 107434

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 with scattered pockets of recovery providing clear opportunities to lock.  In fact, until/unless we see a more meaningful recovery below the 4.625% best-execution level, locking is a good default strategy, and it's just all the wiser if we've had a day or more of progress.
  • (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).