Mortgage rates moved lower for a third straight day, ending the week at their best levels.  Rates are currently just shy of July 23rd lows.  We noted yesterday that financial markets were generally detached from this week's data and events, and that's even more apparent today.  Trading activity was very sparse in the securities that directly and indirectly influence mortgage rates, making for an extremely calm day for Lenders' rate sheets.  Many were unchanged, or close to it, while most offered only token improvements in borrowing costs.  Conventional 30yr Fixed best-execution remains at 4.5% and buydowns to 4.25% may make sense for some scenarios.

Quiet days and quiet weeks have a sort of inertia in that the higher and lower boundaries of rate movements are fairly well entrenched unless something significant and unexpected happens.  The trade off is that the movement in between those boundaries can be quite random.  This happens because of low volume and low participation.  In the same way that a small-stakes poker game between 3 people can be drastically affected by the actions of 1 player, low volume/participation markets are more affected by the actions of fewer traders.  Conversely, when there is more cash on the table and more players in the game, the actions of only one player are far less consequential. 

More players will return in the middle of next week, but that process will only be gradually ramping up until the following week when markets will look for any clues in the Fed Meeting Minutes that might suggest a leaning toward September or December for beginning to reduce their asset purchases.   The Friday after Labor Day is the "big game" however, as August's Employment numbers are released.

Loan Originator Perspectives

"Bond market predictably (for a change) flat today, with more minor gains seen. We'll take flat amid sporadic Fed Speak on September tapering. Borrowers who floated "won" slightly better pricing, those who locked earlier in the week "won" peace of mind. No big winners either way, but no losers either." -Ted Rood, Senior Originator, Wintrust Mortgage

"Pretty uneventful Friday. Mortgage backed securities have managed to eek out small gains and have already allowed at least one lender to reprice for the better . I rarely advise locking on a Friday, and this one is no different. I favor floating til Monday as most lenders will be reluctant to pass along the gains."  -Victor Burek, Open 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).