Mortgage rates were slightly higher today, but remain near their best levels in more than 6 weeks.  The first rate sheets of the day were noticeably weaker, but several lenders revised rates during the day as market conditions improved.  4.5% remains the most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution).  When adjusted for day to day changes in closing costs, rates rose an equivalent of 0.01% today.

Today's relative lack of change in the rate environment is partly a function of the empty event calendar.  There was little to inspire bond markets (which ultimately affect mortgage rate sheets) in either direction. 

Additionally, the 2014 improvements in rates may simply be running out of momentum, or leveling-off ahead of the next important piece of information: next week's FOMC Announcement.  That will be the Fed's opportunity to either stay at the same pace of reduction in asset purchases or to pause the so-called tapering process.  Most of the market thinks the Fed will continue cutting $10bln a month, but after the weak jobs report earlier this month, there's not universal agreement.

A steady pace of tapering would be consistent with rates continuing to treat current levels as something of a floor, but if the Fed takes a softer approach, the improvements could continue.  In general, further improvement is tougher and likely to be more measured between now and the Fed announcement.


Loan Originator Perspectives

"After a weaker opening, the rates markets have managed to claw their way back to positive territory. As of noon central time I have only seen a couple reprices for the better. The benchmark 10year is holding right at resistance at 2.82. For that to break, it will take some significant weak data to post. I am not totally against floating overnight but if I was within 10 days of closing I would go ahead and lock today." -Victor Burek, Open Mortgage

"Slow data day in a slow week. Next week's Fed meeting (and presumed tapering announcement) is the elephant in the room. We regained this morning's minor MBS losses as the day progressed, and are near low rates of 2014. Will be interesting to see if December's awful jobs report impacts Fed's view of the economy. Conjecture is they may disregard it, which would lead to more tapering and higher rates." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage

"All I can say is I hope the trend we're seeing will continue. We know tapering has started and will not stop based on one bad jobs report. String together a few bad reports and we have something to cheer about. Edging closer to drop below 4.5% but not quite there yet with all investors. Still favor locking as things get bad much faster than they improve. Lock negotiations are an option should rates take a big drop." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc. NMLS # 107434

Today's Best-Execution Rates

  • 30YR FIXED - 4.5%
  • 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.  
  • The exceptionally weak employment data on January 10th provided on of these "pockets of recovery."  There are two ways to approach these.  More risk tolerant: set a line in the sand just slightly higher in cost than your current quote.  In other words, this could be either the next .125% higher in rate or simply a few hundred dollars more in closing costs.  Then commit to lock when your quote crosses above that line in the sand.  Less risk tolerant: lock on the day of or day after any significant move lower in rates.
  • (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).