September 15, 2014
Mortgage rates managed to hold steady today, which matches the very best performance of any other day in September. In other words, rates have either been flat or higher every day for the past 11 days. As we discussed last week, this quick move to higher rates is based, to some unknown extent, on anxiety over the upcoming Fed Announcement. Market participants are concerned the Fed will change the verbiage of their official policy statement to indicate a potential rate hike earlier than expected. Bond markets respond to that concern with weakness and when bond markets are weaker, rates move higher.
Interestingly enough, bond markets were actually somewhat stronger today, but it wasn't enough to make for a widespread improvement in lender rate sheets. Some lenders were, in fact, slightly better, but plenty were slightly weaker. The net effect is 'unchanged' rates compared to Friday's latest offerings. 4.25% remains the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios. 4.125% had that distinction until Friday.
The Fed Announcement isn't necessarily the only motivation out there for bond markets. But because that idea has become so ingrained in market psyche and media coverage, the reaction to Wednesday's Announcement can't help but cause volatility for rates. Even though today was flat, there's plenty of risk that rates could continue higher.
Loan Originator Perspective
"Last Thursday, in the middle of the selling, we saw a day of slight improvement. That proved to be a day to lock for those that missed it as selling continued on Friday. This may be that opportunity, this week. We're outside the long term range of lower rates, and until we have affirmation of a continued more lower....rising rate is the highest likelihood. Locking is the smartest option." -Brent Borcherding, brentborcherding.com
"At this point, the damage has been done to rate sheets. If you are still floating, i would continue to do so until at least tomorrow. Rates have regained some of the losses from last week; however, the benchmark 10 year note has broken out of the range to the top side. The biggest event this week will be Wednesday's FOMC annoucement where many believe they will change the verbiage regarding low rates for an extended period which is the main cause of the recent and rapid rise in rates. If they keep the verbiage unchanged, hopefully we will regain more of the recent losses." -Victor Burek, Open Mortgage
"Well, we stemmed the bleeding today, which is a good thing considering last week's selloff. It's too early to tell if we've turned the corner, will all depend on Wednesday's Fed statement (and investors' response to it). With international strife on the back burner momentarily, we're focused on Chairman Yellen's economic outlook. It was a year ago that the Fed surprised us all by NOT tapering their bond purchases as expected, will be interesting to see what Wednesday's statement holds for rates. If you're floating, have your loan officer on speed dial Wednesday. At least the Fed statement hits mid-day, giving us time to lock loans in progress if pricing starts to worsen."-Ted Rood, Senior Originator, tedroodteam.com
"The bleeding finally stopped today in the MBS market. Is it temporary or not is the key question which will be answered Wednesday when the Fed decision is announced. Until then floating makes the most sense." Manny Gomes, Branch Manager, Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.25
- FHA/VA - 3.75-4.0%
- 15 YEAR FIXED - 3.375-3.5
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- The hallmark of 2014 so far has been a disconcertingly narrow range in rates. Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower.
- As of June, rates are now lower year-over-year, but that's mostly due to rates' path higher in 2013. The current path in 2014 remains sideways, though it has recently approached (but not broken) the lows set in late May
- European markets continue to play a prominent role, generally helping rates in the US remain lower than they otherwise might be.
- From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range. While top tier rates moved up an eighth of a point in early September, to truly move out of the "narrow range," we'd need to see another .125% higher (best-execution at 4.375%)
- As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.' Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy. It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).