Mortgage rates were abruptly higher today, moving back toward the highs of the month and erasing most of the improvements seen since the Employment Report on August 2nd.  After an excessively calm week last week, market participants had eagerly anticipated today's Retail Sales report as the first major dose of information since that Employment Report.  Rates were already on the move higher ahead of the data owing to bond market weakness in overnight.  While the headline numbers on the Retail Sales report weren't as high as expected, not only was the previous reading revised higher, but the other components of the report--such as those that strip out the more volatile auto sales--were stronger than expected.  By the end of the day, the most prevalent 30yr Fixed quote (best-execution) is edging up from 4.5 to 4.625% for some lenders.    

In order to understand why rates moved as much as they did today, we first need to frame Retail Sales in the context of the prospects for a reduction in the Fed's asset purchases--aka "tapering."  Markets and even the Fed itself are undecided as to whether tapering will start in September or later in the year.  Because the asset purchases are seen as a mathematically quantifiable reason for lower rates, the sooner the reduction in purchases occurs, the higher rates will go, all other things being equal.  This morning's Retail Sales numbers stood as the first major piece of data to inform that debate since the Employment Report at the beginning of the month. 

Quite simply, the data "wasn't bad enough" to push out the expectations for a tapering time frame.  Combining this with the upward momentum in rates coming out of the European market hours and it was enough for a significant move higher.  Unfortunately, it wouldn't be until Thursday that we even have a chance to get data that counteracts this "vote."  Even then, this would require several different pieces of data having the same economically bearish suggestion.  In other words, rates aren't likely to stampede back toward better levels unless that happens.  If the data happens to confirm today's message from Retail Sales, rates could go even higher.

Loan Originator Perspectives

"Markets opened lower today and remained so. FedSpeak continues to point traders towards potential September tapering, and December taper is essentially a given, even if Sept isn't. We've been locking at application in most cases, and that's served us well." -Ted Rood, Senior Originator, Wintrust Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 4.5%
  
• FHA/VA - 4.25%
  
• 15 YEAR FIXED -  3.625%-3.75%
  
• 5 YEAR ARMS -  3.0-3.25% depending on the lender

Ongoing Lock/Float Considerations

• After rising consistently from all-time lows in September and October 2012, rates challenged the long term trend higher, but failed to sustain a breakout
• Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
  
• Fears about the Fed's bond-buying intentions were proven well-founded on May 22nd when rates rose to 1yr highs after the Fed indicated their intention to taper bond buying programs sooner vs later
• The June 19th FOMC Statement and Press Conference confirmed the suspicions.  Although tapering wasn't announced, the Fed made no move to counter the notion that they will decrease bond buying soon if the economic trajectory continues
• Rates Markets "broke down" following that, as traders realized just how much buy-in there was to the ongoing presence of QE.  These convulsions led to one of the fastest moves higher in the history of mortgage rates and market participants have not been eager to be the among the first explorers to head back into lower rate territory until they're sure they'll have some company.
• (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).