July 25, 2013
Mortgage rates began the day moderately higher, but as market conditions improved most lenders released improved rate sheets bringing offerings more in line (or slightly better than) yesterday's. This keeps the 30yr fixed best-execution rate at 4.5%, though buying down to lower rates can make sense in some cases. For the first this week, lender pricing strategies are highly stratified. This simply means that some are in noticeably better territory, some are almost imperceptibly stronger, and a few others either have yet to reprice or haven't quite caught up with the rest of the pack yet.
Today's economic data was not a significant motivation for interest rates though the completion of the week's Treasury auctions helps take some supply pressure off bond markets. Treasury supply is just like anything else in terms of "supply and demand." As it increases, prices fall, and falling prices in bond markets mean higher rates. MBS (the "mortgage-backed-securities" that most directly influence mortgage rates) tend to move in the same direction as Treasuries (just like stocks in the same sector tend to move in the same direction unless there's company-specific news that affects one over the other).
It's not as if markets aren't planning on this new supply coming to market, but there's always some amount of variability as to how other auction participants will bid. In general, markets are slightly less aggressive in buying Treasuries until auctions are complete, allowing for some of that demand to come back into view. This doesn't mean nearly as much as it sounds like it might, but is just another small piece of today's ability to hold its ground against the past two days of weakness. In general, we continue to be in a wide, sideways range ahead of next week's more important events, with possibilities that rates can move in either direction in the meantime.
Loan Originator Perspectives
"MBS soft this AM, but regained most of the ground lost following a decent 7 year bond auction. We're still range bound at upper end recent rate ceilings. Volatility is nowhere near May and June's, and both LO's and borrowers can be thankful for that." - 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).