January 9, 2014
Mortgage rates were sharply unchanged today with the few better-priced lenders offset by a few others in worse shape compared to yesterday. The balancing act was only perfectly achieved in the afternoon when several lenders released better rate sheets after trading levels improved. In other words, rates were slightly worse this morning, on average, but afternoon reprices brought them in line with yesterday's levels. As such, 4.625% remains the most prevalently-quoted rate for ideal, conforming 30yr Fixed loans (best-execution).
Tomorrow brings the month's most important piece of economic data: the Employment Situation Report. In fact, this is the first major dose of market-moving information since the Fed announced the reduction in asset purchases on December 18th. As always, it has more potential than any other economic report to cause movement for mortgage rates.
When considered in conjunction with the fact that the rate environment has been exceptionally flat for the past several weeks, a big reaction to this data may well kick off the next wave of momentum. A weak number could usher in a more developed pocket of recovery while a stronger number could make for a run at a 4.75% 'best-execution' level.
Loan Originator Perspectives
"I have a couple of folks floating right, but most are locked or outside of a lock window. My recommendation is to lock with 4.625%, best execution 30 year fixed today. With the ADP report on Wednesday so strong and the greater correlation between ADP and the BLS, one would guess that we will have a strong report at 8:30 tomorrow. I'm not sure anything good arrives tomorrow by floating." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
"Tomorrow brings us the most important data that we receive on a monthly basis, the non farm payrolls report. Floating through this report is extremely risky. The report would have to come in much worse than expected for there to be a sizeable reward which makes floating not worth the potential gain. " -Victor Burek, Open Mortgage
"Rates managed to go no higher today with some help from a decent bond auction today. The crucially important employment data is coming up tomorrow and will be out before rate sheets. If it's stronger than expected, rates could rise as fast they have in several weeks, but there's also potential for improvement if the number is weak." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"Locked yesterday and definitely locking today. Tomorrow is one of the most important reports for the year in my opinion. Though the employment picture could change, I think this report will set the tone for expectations all year. A great number and 3% in 10 year Treasuries is in the rear view mirror. That will not be good for rates. A surprise bad number would probably be excused and only have a marginal positive effect." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc. NMLS # 107434
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 with scattered pockets of recovery providing clear opportunities to lock. In fact, until/unless we see a more meaningful recovery below the 4.625% best-execution level, locking is a good default strategy, and it's just all the wiser if we've had a day or more of progress.
- (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).