September 26, 2013
Mortgage rates were unchanged today, keeping them in line with the lowest levels in over three months. This is the 12th business day in a row where rates have either been unchanged or better. Conforming, 30yr Fixed rates remained at 4.375% (best-execution) for most lenders, though some are efficiently priced at 4.25%. Others still have attractive buydowns to4.125%, depending on your scenario and personal preference. Keep in mind that "points" are neither bad nor good--simply a choice between paying interest up front or over time. An 'attractive buydown' connotes a shorter amount of time for the total monthly payment savings to surpass the extra upfront cost required to lower the rate/payment.
Trading was relatively calm today for the mortgage-backed-securities (MBS) that most directly affect lenders' mortgage rates. As we've recently discussed, further progress in this already-impressive move lower in rate will be increasingly tough and would require noticeably downbeat economic data. We didn't get that today as the final GDP revision was in line with the preliminary reading of 2.5%. Moreover, Initial Jobless Claims were much lower than expected.
Although there have been 2 other days like today during this winning streak, where rates were unchanged from the previous day, the pace of improvements was already beginning to slow. Add to that the fact that it's been a historically big move of 3/8ths of a percentage point in less than 3 weeks, and it makes sense for those with shorter term outlooks to consider locking. Those with longer term outlooks will have to decide how much they're willing to gamble as our ability to move much lower from current levels is very likely predicated on next week's Employment Situation Report. A weak jobs report could reinvigorate the rate rally and reintroduce "high 3's" into the mortgage rate conversation, whereas a strong report might take us right back to "high 4's."
Loan Originator Perspectives
"We gave back some of the gains we enjoyed yesterday, despite weaker than expected GDP and inflation data. Seems we will be range bound until next week's ever so important non farm payrolls report. I'm sticking with the same advice I provided yesterday, lock if you are within 15 days closing. Between now and next Friday, I don't think we will see significant gains or losses, so floating until you are within 15 days will allow you to lock with the best available pricing." -Victor Burek, Open Mortgage
"Rates remain at good levels- not the time to be greedy!" -Bob Van Gilder, Finance One Mortgage
"As noted the last couple of days, floating wasn't a bad call IF borrowers had proactive LO's who followed the MBS market. We gave back yesterday's gains today, and face the prospect of markets taking a "wait and see" attitude with next week's September jobs report looming. Best advice I can give: whether borrowers want to lock or float, neither can happen until they've started the formal loan application process." -Ted Rood, Senior Originator, Wintrust Mortgage
"Couldn't expect rates to keep going lower forever. It is healthy in any bull market for a small pull back for profit taking and re-positioning. Not saying we are in a bull market for bonds, but the recent movements have created a rally which can lead to something much bigger. Next week's employment data will be the heavyweight of data to influence interest rates. Our advice would certainly be to consider locking at these levels prior to any defensive trading that may take place leading up to the report & possible selling that may take place if the report is not bond friendly. Keep in mind random reports, speeches from the FED, and unexpected geopolitical events can always affect the market without warning. If you like where you are, LOCK IT UP." -Constantine Floropoulos, Quontic Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.375%
- FHA/VA - 4.25, Some Lenders are Lower
- 15 YEAR FIXED - 3.5%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
- Expectations for "tapering" (a reduction in "QE3" asset purchases) mounted over the summer and September 18th was seen as the most likely day for a potential tapering announcement
- But the Fed decided to keep a change in QE amounts on hold until the economy could more convincingly show that rising rates (which had been rising because markets expected the Fed to taper!) wouldn't be too big an impediment to further improvement.
- That's resulted in the first meaningful "pause" in the "rising rate environment" since it began in earnest in May, 2013. This won't necessarily be an ongoing move in the other direction, and we're nowhere near May's rates yet, but it's a good opportunity to get back in the market if rising rates pushed you out sometime between now and then.
- The extent to which that remains true relies on incoming economic data. Strong data will increase the speculation that the next Fed meeting will contain a reduction in purchases
- (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).