Mortgage rates held steady yet again, ending their second week of significant improvement and contributing to what may soon be the first 2-month stretch of improvement since the Spring of 2012.  Some lenders' rate sheets were slightly weaker today while others improved.  The net effect was an unchanged 30yr fixed rate of 4.125% (best-execution), on average for ideal scenarios, with the day-over-day changes being seen in the form of higher or lower closing costs.

The uneventful movement in rates sheets reflects the uneventful day in financial markets, particularly the mortgage-backed-securities (MBS) that most directly influence mortgage rates.  Even in broader bond markets, the last few days have been a break in the recent action driven by the debt-ceiling resolution and Tuesday's Employment situation report. 

The employment data continues to be the biggest consideration for interest rates, though we can't yet be sure what kind of reaction we'll see to the rest of the economic data that's returning next week after taking time off during the shutdown.  Whatever ends up happening, bond markets are currently moving as if they entertain the possibility of further improvement (i.e. "lower rates").

That doesn't mean we're heading to lower rates all things being equal, but it does mean that bond traders are trading like they'd entertain that possibility if the economic data suggests it.  That's the first time such a thing can be said in roughly five months.  The only challenge will be filtering out any noise from the shutdown.  We'll get to see how that process goes next week when October's economic data starts arriving in bits and pieces.


Loan Originator Perspectives

"Another strong week for interest rates leaves us with a sense of euphoria heading into the weekend.  Next week holds more of the usual uncertainty with data and auctions. The trend continues to be friendly but pay close attention to recent technical resistance at 2.47 and support around 2.51. The range is extremely tight, therefore float with caution, but rest assured that the trend is on your side. " -Constantine Floropoulos, Quontic Bank

"More mixed economic news today helped bond markets log slight gains. Great week, trend is now our friend. We've built on NFP improvement, tapering not looking to happen till well into 2014. Buyers and borrowers may want to consider floating IF they have risk tolerance and a loan officer who is MBS savvy!" -Ted Rood, Senior Originator, Wintrust Mortgage


Today's Best-Execution Rates

  • 30YR FIXED - 4.125%
  • FHA/VA - 3.75-4.4%
  • 15 YEAR FIXED -  3.375%
  • 5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

  • Uncertainty over the Fed's bond-buying plans and more recently over Fiscal Policy has been making for a tough interest rate environment.
  • A lack of data due to the government shutdown caused rates to experience moments of paralysis while headlines suggesting the shutdown might/might-not end, as well as a seizing-up of short term funding markets caused unexpectedly high volatility--enough to be felt in longer term rates like mortgages.
  • After a deal was reached to avoid going over the debt ceiling, funding markets thawed and rates returned to the same 'wait and see' range that existed before the Fiscal drama. 
  • Markets continue to be most interested in economic data and it's suggestions about the longer term trajectory of the economy.  This will shape expectations for Fed policy in the coming months, and thus inform the direction of interest rates.
  • The stronger the data the more likely the Fed is seen as reducing asset purchases.  Rates would rise under this scenario, but the most recent FOMC Meeting (and more importantly, the Fed's decision to hold off on tapering) suggests that they'll attempt to keep the pace of rising rates moderate as long as inflation isn't adversely affected.  The delayed release of the September jobs numbers on October 22nd helps confirm that.
  • (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).