Mortgage rates improved moderately today, making it back to levels not seen since July 3rd. That makes today something of a symbolic victory as July 3rd was the last trading day before rates swung roughly a third of a point higher in one fell swoop on Friday July 5th. Conventional 30yr fixed best-execution is now down to 4.5 percent on average though several lenders are competitively priced at 4.25 - 4.375 percent. This doesn't necessarily mean that one lender will have the same closing costs at 4.5 as another would at 4.25 (though that is roughly the range between the best and worst), simply that it may make financial sense to some borrowers to pay more closing costs in exchange for a lower rate.
Today's movement was medium-sized in the grand scheme of things, and certainly could have been much larger in either direction given its source of inspiration. The potentially inspiring event today was the first of two rounds of Congressional Testimony from Fed Chair Ben Bernanke. Building a clear sense of how and when the Fed will adjust its asset purchases is the biggest consideration for interest rates right now, and Bernanke's testimony is/was the biggest piece of information on that topic this week or the next.
Given the way the day unfolded, market participants weren't waiting for new information that would then give them the confidence to trade rates a bit lower. Instead, they were waiting for the ABSENCE of new information that would have taken rates higher. That confirms a certain level of fear and defensiveness assumed to be fueling recent highs. It was impossible to measure the effect of that fear at the time, but days like today help confirm it and the fact rates didn't fall much further today, lets us know that they're operating in the vicinity of "neutral" heading into the next batch of super important events at the end of the month.
That leaves us with roughly the same conclusion that we came to before today, which is a half point range centered on the "mid 4's." Depending on how the next few days go, the center of that range will either end up being 4.5 or 4.625 percent, with extremes at 4.25 and 4.875 percent (for many less-than-flawless scenarios, these rates won't apply. In that case, simply look at today's rate as the mid-point). There's still an opportunity for tomorrow's Bernanke Testimony to have a larger-than-normal effect on markets, but this time that possibility will be confined to the question & answer period only (whereas today's movement was on the initial release of the prepared remarks).
Loan Originator Perspectives
"All eyes on Capital Hill this AM as Chairman Bernanke spoke to Congress. Gist of his message (and day's data) was MBS dovish, and this time market didn't throw a taper tantrum, instead rallying by over 1/2% before settling back some in PM trades. We'll take it for now, and hold our collective breaths until tomorrow when Senate gets their crack at him." -Ted Rood, Senior Originator, Wintrust Mortgage
"Initial reaction from Bernanke’s testimony has offered further validation that the Fed’s bond buying will continue in the short term. In addition, this also kept the window open for the asset purchase program to continue (contingent on economic data and stronger emphasis on job markets). With the Retails Sales miss on Monday, a disappointing Housing Starts/Building Permits report today, and a dash of Bernanke’s MBS friendly comments-- we have momentum building into this rally. Tomorrow we see Jobless Claims, and if the reports earlier this week give any indication that claims will increase; loan pricing will continue to improve. " -Justin Dudek, Mortgage Professional, Supreme Lending
Today's Best-Execution Rates
- 30YR FIXED - 4.50%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 3.625%
- 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).