Mortgage rates fell abruptly today, following a significantly weaker than expected Employment Situation report. The data hit markets before most lenders had rates available for the day, but most of them still held back on the first round of rate sheets. As trading levels in the secondary mortgage market only improved into the afternoon, lenders released new rate sheets reflecting more of the day's movement. Ultimately, it's been enough to bring 4.5% back into view as a best-execution rate, though 4.625% remains at least as prevalent.
Today's movement ends up being fairly uncomplicated. Heading into late December, rates leveled-off into an extremely flat pattern. This carried into the new year and it became increasingly clear that it would be up to today's big jobs report to cast a vote for the next move to be higher or lower.
All major economic reports have a published consensus level, readily available from the likes of Reuters and Bloomberg. These are median values based on surveys of economists and other forecasters which essentially amount to the market's expectations. The farther away from those expectations a given piece of data falls, the more of an impact it can have on markets. The more important the report, the more magnified the effect.
With that in mind, today's Employment Situation report is THE most important piece of recurring economic data and the margin by which it missed expectations is among the largest ever. Weaker employment data tends to push rates lower and today was obviously no exception.
While that's great news in the short term, the conclusion is less obvious in the longer term. The Fed has already begun tapering and it will probably take more than one jobs report (no matter how far off the mark it is) to even get markets considering a potential change in course. As of right now, this report amounts to a very welcome push back against the broader uptrend in rates though the uptrend remains intact. The question simply concerns how long the push back will last. The longer it does and/or the bigger it gets, the riskier it is to float.
Loan Originator Perspectives
"Todays employment data comes just in time to save us from taking another
significant move higher in rates. I would say wisdom will lean towards
locking in these gains as they probably will be short lived, but there
may be more to this recent move in the immediate near future. The SAFE
BET -If closing within 30 days you should should be locking your loan as
a defensive move on a bullish day, longer than 30 may consider the same
as we are in a very volatile and unfriendly environment for rates. " -Constantine Floropoulos, Quontic Bank
"All eyes were on highly anticipated Jobs Report that was released this
morning, and report was considered a major miss with only 74k new jobs
created in December with initial estimates closer to 200k. 10 year
Treasury has continued to hover around 3.00%, and the impact of this
report has moved the 10 year below levels seen last before the FOMC
tapering announcement. Today's report has shifted the momentum towards
lower interest rates, and Retail Sales next week can further confirm
this momentum swing. Cautiously floating is your best bet. " -Justin Dudek, Senior Loan Officer, Supreme Lending
"Remarkably poor NFP report today as job growth was the smallest since
January 2011. Mortgage rates predictably improved, but it's common for
secondary departments to initially hold back a portion of large one day
gains. With that in mind, it's possible that Monday's pricing may be
better than today's. Not ready to concede that rates will plummet in
the days to come, but today's data sure indicates the economy still
faces challenges." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"A pleasant surprise today with a horrible jobs number printing. Rates
have actually improved noticeably in price. The talking heads on
various financial news networks are saying this is an outlier on the
recent data trends for jobs and that revisions next month will show the
Dec # to be wrong, but we'll take it for the short term. Locking was
still the safe bet yesterday and if the downward trend continues,
renegotiations on locks will take place. For now the market might be
spooked into a rate retreat and next month we'll know for sure.
Locking in gains and hoping for more is recommended in my opinion. " -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc. NMLS # 107434
Today's Best-Execution Rates
- 30YR FIXED - 4.5 - 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.
- (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).