December 11, 2012
Mortgage rates are little changed from Monday. Some lenders' rate sheets are slightly improved versus yesterday's, but a majority offered just slightly weaker rates. Today's political and economic events in the US were of little consequence to bond markets, including the secondary mortgage market. Instead, interest rates were broadly higher right out of the gate due to overnight pressure from positive developments in Europe. That said, and to reiterate, the overall movement was quite small and markets generally maintain a tight, sideways stance ahead of tomorrow's FOMC Announcement. Best Execution remains between 3.375% and 3.25% depending on the lender and scenario.
(Read More:What is A Best-Execution Mortgage Rate?)
So what's the deal with the FOMC Announcement? The FOMC ("The Fed") holds 8 meetings a year and prepares 8 statements on monetary policy. These can be referred to as "Fed Rate Decisions," "FOMC Announcements," and of course simply FOMC Statements. Tomorrow's particular statement is an important one in that it's the likely venue for the Fed to, in some way, extend Operation Twist. Under that policy, the Fed has sold shorter term Treasury holdings and reinvested the profits into longer-term holdings. The idea is to bring long term rates down, thus stimulating borrowing, lending, and spending.
In general, Operation Twist has been of some benefit to mortgage rates, though not as much as the direct purchasing of Mortgage-Backed-Securities ("MBS") which was announced in a separate program on September 13th. Whereas US Treasuries are the risk-free benchmark of US debt, MBS are similar enough for investors that if Treasuries move enough, MBS tend to move in a similar direction to keep pace with Treasuries.
The details of tomorrow's announcement can have a substantial impact on Treasury yields and a lesser, but noticeable effect on MBS and by extension, mortgage rates. It's possible that the ongoing debate over the Fiscal Cliff really is keeping bond markets as steady as they have been since early November, but if there was one dark horse in the race that could upset that ideology, it would be Wednesday's FOMC Announcement.
Loan Originator Perspectives
"Tomorrow's Fed announcement has the ability to really impact rates in either direction. Seems most believe they will announce more easing through the direct purchase of more treasuries. If we get no mention of further easing, i suspect rates will jump higher, so floating through this is risky. " -Victor Burek, Open Mortgage.
"Tomorrow's Fed statement will certainly be interesting, whether it moves rates or not. The Fed's take on the fiscal cliff debate/debacle may influence rates and market sentiment as much as any Fed action. My pipeline is locked, rates are just too good to gamble at this point. I personally don't expect any large MBS changes until the cliff is resolved (one way or the other)." -Ted Rood, Senior Originator, Wintrust Mortgage.
Today's Best-Execution Rates
- 30YR FIXED - 3.25% - 3.375%
- FHA/VA - 3.25% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.875% - 2.75%
- 5 YEAR ARMS - 2.625-3.25% depending on the lender
Ongoing Lock/Float Considerations
- Rates and costs continue to operate near all time best levels
- Rates could easily move higher or lower, but given the nearness to all time lows, there's generally more risk than reward regarding floating
- This will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
- (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario. There can be all sorts of reasons that your quoted rate would not be the same as 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).