Mortgage rates improved again today, bringing them to their best levels of month, just on par with rate sheets from late August.  Conforming, 30yr Fixed rates held at 4.625% in some cases with the improvement being more readily seen in the form of lower closing costs.  In others, the the most efficient combination of upfront cost and monthly payment (best-execution) fell to 4.5%.

The Federal Reserve is very much in focus for several reasons.  Of course the upcoming meeting and announcement on Wednesday have been in focus for several months as they've increasingly become the most likely venue for the Fed to signal a reduction in asset purchases (aka "tapering").  Wednesday remains important for that reason, but also because the text of the announcement, the press conference with the Chairman and the staff economic projections will help build the market's sense of how the Fed will handle itself as the tapering process (assuming it's announced) continues to unfold.

These things are important to mortgage rates because the nature of Fed policy with respect to those asset purchases has a direct effect on the mortgage-backed-securities (MBS) that underpin the world of mortgage rates not to mention the general effect on economic and market momentum.  In other words, sentiment surrounding Fed policy can move "bond markets" in general and specific decisions regarding MBS purchases can have an additional positive or negative effect on Mortgage Rates specifically. 

Even outside the realm of policy adjustments, the Fed is a market moving consideration.  Today, for instance, the fact that Larry Summers withdrew from consideration as the next Fed Chair gave both sides of the market (stocks and bonds) a boost.  This happened because Summers was seen as more likely to dial back the accommodation whereas the remaining frontrunner Janet Yellen is seen more like Bernanke.  Fears of decreased accommodation under Summers have perhaps been a slight drag on prices of Stocks and Bonds.  When bond prices fall, rates rise. 

The reaction was acute at first, primarily in US Treasury markets overnight.  By the time lenders' first rate sheets came out, markets were already starting to rebound from the big overnight movement.  Most lenders would go on to hike rates several times by the end of the day, even though final rate sheets remained better than Friday's latest..

Loan Originator Perspectives

"If you were lucky enough to lock in this morning, it was a wise decision. For those who hesitated to wait and see how good things would get, well you missed the boat. Overnight news was very bullish, and potentially may continue to be a factor following Wednesday FOMC release. The truth is the market has been somewhat bond friendly, we have seen about a 20-25 bps drop in 10 year treasury yields from the highs of a few weeks ago and MBS have followed suit (somewhat). At this point consumers need to book profits before they disappear. 15 days locked, 30 days out looking to lock prior to FOMC release. Borrowers with deeper pockets may consider floating through FOMC in hope of a major improvement, with a tremendous risk in rates rising dramatically in a blink of an eye!" -Constantine Floropoulos, Quontic Bank

"Best rates in several weeks this AM, but most of the gains evaporated and many lenders revised their rates by mid PM. Whether it was bond short covering or market overreaction to Fed chair news, borrowers had a nice, albeit short, window of opportunity. All eyes now turn to Wednesday's Fed statement. Doubt the Fed will announce any sudden moves, but you can rest assured that bond and equities markets will be hanging on every word." -Ted Rood, Senior Originator, Wintrust Mortgage

"Rate floaters were welcomed this morning with a strong rally in fixed income leading to the best rate sheets in quite some time. Larry Summers withdrew his name for consideration for Fed Chairman which led to the rally....but it was short lived as traders took advantage of the rally to lock in gains driving yields higher throughout the day, but still better than where we ended last week. The time to lock was first thing this morning, as lenders have worsened rate sheets throughout the day, some a couple times. If you missed the opportunity to lock this morning, I would float over night and see what tomorrow brings. Make sure you stay in close contact with your loan originator in the morning." -Victor Burek, Open Mortgage

"Nice open today and if you locked before noon, chances are you got in before the re-prices started rolling in. With Summers out of the running for FED Chairman, markets seem to be happier. But the official taper moment is here this week so we can hope the worst is baked into rates already. If so, we may see some improvements, but nothing concrete until the official announcement. Locking is always a safe bet." -Mike Owens, Partner, Horizon Financial Inc.

Today's Best-Execution Rates

• 30YR FIXED - 4.625%, some 4.5%
  
• FHA/VA - 4.25
  
• 15 YEAR FIXED -  3.75%
  
• 5 YEAR ARMS -  3.0-3.50% 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).