July 15, 2013
Mortgage rates moved lower to start the week, adding on to last week's solid recovery from 2yr highs a week before. As expected, rates took their most meaningful cue from today's Retail Sales report, which was weaker than forecast. This was a benefit to Treasuries and MBS (the "mortgage backed securities" that most directly affect rates) even before lenders put out their first rate sheets of the day. Lenders still aren't very unified in their movement from the previous session's rate sheets, but most improved enough to suggest that 4.5% is now sharing some of the best-execution space with 4.625% for conventional, 30yr fixed loans. Also of note is that the costs associated with "buying down" a rate from from 4.5 to 4.25% are worth considering. This makes for much higher closing costs, but on average, those costs are recouped in around 60 months based on today's rate sheets.
In other words, rates would have come out higher this morning if not for the Retail Sales data. From here, there is plenty of data remaining this week, but none of it is quite as meaningful as Retail Sales. More important than any of the data is the congressional testimony of Fed Chair Ben Bernanke on Wednesday and Thursday morning (at the House and Senate respectively). Markets are still looking for clues as to how Fed policy may unfold at the end of the month. The intervening time presents an opportunity for rates to consolidate after hitting recent highs, but it's important to note that there are still ups and downs in the context of consolidation. The last 3 sessions have been "downs" in terms of rates, and until rates are definitively doing something other than consolidating in the big picture, 3 winning days in a row have been hard to come by.
Loan Originator Perspectives
"Seems the pendulum has swung back in MBS' favor after several sound days, including today's gains. Low inflation data and expectations have tempered the market's tapering concerns, and while I don't anticipate us regaining all the losses of last two months, at least we're moving in the right direction. Advising new clients that floating cautiously is not a horrific idea, and believe me, that's a big sentiment change from last two months!" -Ted Rood, Senior Originator, Wintrust Mortgage
"Let's hope the economic reports keep the positive tone rolling. Rates will benefit from bad or weak numbers. Maybe we can string together a few days of positive gains for rates. Sure would be nice. Locking in the gains is never bad, but floating almost seems to be creeping back into the picture. Always of course with the lock button with in reach." -Mike Owens, Partner, Horizon Financial Inc
"My 2013 of 'lock the rate dips' is applicable right now, ahead of what's almost certain to be volatile rate days Wednesday and Thursday as Fed chairman Bernanke publicly fields questions from lawmakers. Rates spiked severely the last time he publicly fielded questions (from journalists) on June 19. Back then, he said rising home prices compensate for higher rates. His Fed colleagues backpedaled since then but still: more public comments will mean more rate volatility ahead. " -Julian Hebron, Branch Manager, RPM Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.50 - 4.625%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 3.625 - 3.75%
- 5 YEAR ARMS - 3.0-3.375% 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).