Mortgage rates were little-changed today, ending the year less than a quarter of a percentage point away from their highest levels in more than 2 years.  4.625% remains the most prevalently quoted rate for ideal, conforming 30yr Fixed loans  (best-execution), with the only changes being seen in the form of closing costs.

On average, rates were an eighth of a percentage point higher on several occasions in August and September this year.  Before that, we'd have to go back to April 2011 to see higher. 

Despite the steep rise in rates in 2013, the average rate for the entire year (4.25%) is the second lowest on record next to 2012's 3.75%.  The previous 3 years were each roughly 0.25% higher and 2008 was roughly a full 1.0% higher than that.  To make this easier to digest, here's a quick recap of that info:

2008 - 6.0%
2009 - 5.0%
2010 - 4.75%
2011 - 4.5%
2012 - 3.75%
2013 - 4.25%

As we've discussed all year, part of the reason for the abrupt rise in rates has to do with the market perception that 2012 in the table above, looks like a long term turning point.  The silver lining to that phenomenon is that even if it turns out to be the case, it connotes a much higher probability of slower increases into 2014.  It's even tempting to say that if history repeats itself, years like 2013 are typically followed by a recovery by the end of the following year, but there are two important caveats.

The most overt counterpoint to that historical norm is that the 1999's rate movements were very similar to 2013's (just talking about the pace and magnitude, not the rates themselves).  Although rates did make it most of the way back to 1999's lows, it didn't happen until 12/31/2000 and those improvements didn't even start showing up until the Fall of 2000.  After that, it wasn't until the middle of 2001 that rates finally broke 1999's lows.

The other significant caveat to hoping history repeats in some way is that history has been one-sided for the better part of 30 years.  After rates topped out in the early 80's and corrected sharply from 84-86, rates entered a remarkably linear era of constant improvement.  Sure, the movement from one end of the range to the other seemed severe when it happened abruptly (87, 94, 99, 03, 09, and 2013), but overall, the same parallel lines that were emerging in the early 90's have contained all the mortgage rate movement since then.

To state the obvious, of course history is going to look like it's been repeating itself if the same thing has been happening for most of the time that most anyone with an opinion has been old enough to have one.  If we're considering a long term shift in that decades-long trend, the extent to which we can expect 2014 to behave like 1994 or 2000 is limited.  There will be pockets of recovery--perhaps even big ones--but in looking back on 2013, it's very likely we've just seen the lift-off from 2012's all-time lows.

(The "frosting side" of that otherwise unpalatable nugget would be that the same sort of lift-off seemed like a possibility following previous generational lows, especially in 2003 and--for those not in tune with European events--2010).

Loan Originator Perspectives

"Short, slow day to close out the year, and what a year it's been. 10 year treasuries opened 2013 at 1.7%, and ended just a touch higher at 2.99%. 2013 was the end of an falling rate era, one unlikely to be repeated soon. At least rate increases are contained at the moment; housing markets may withstand current rates, but wouldn't be so confident if they continue to climb. Happy New Year all!" -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).