December 7, 2012
Mortgage rates moved higher at their fastest pace in over two weeks following Friday's Employment Situation Report. In a historical context, the losses were moderate as the range of available rates continues to be uncommonly narrow. Additionally, many lenders repriced to higher levels with yesterday afternoon's weakness, and in those cases, the day-over-day damage is less severe.
The most prevalent and efficient rate quote for an ideal scenario was in the process of edging down to 3.25% for 30yr Fixed, Conventional Loans before yesterday's weakness. Since then, 3.375% has crept back into the picture as a Best-Execution rate, but 3.25% is still viable depending on the lender and scenario.
Today's market movements resulted, in large part, from the stronger-than-expected job creation seen in the Employment Situation Report. Forecasts called for 93k new payrolls to be created versus 171k last time. The actual number was 146k today--much better than the consensus, but still not indicative of a healthy labor market.
Fallout from Hurricane Sandy is the driving force behind many of the lowered expectations for the recent crop of economic data. But today's report noted that Sandy DID NOT, in fact, distort the data. So the better-than-expected results are not as meaningful considering the "expectation" side of the equation was lower than it otherwise would have been.
The fact that interest rates still rose alludes to other pressures in bond markets, as well as some purely technical correction after reaching the best levels in weeks. Whether or not this bounce back toward higher rates continues in the week ahead will likely depend on any relevant Fiscal Cliff headlines as well as the FOMC Announcement mid-week, where markets expect the Fed to extend the Treasury buying program dubbed "Operation Twist."
(Read More:What is A Best-Execution Mortgage Rate?)
Loan Originator Perspectives
"Despite a better than expected payrolls report, mortgage backed securities are holding up rather well. Lenders really whacked rate sheets this morning taking away much more than the price drop of mbs justified. If you floated through this report, I would definitely continue floating until Monday." -Victor Burek, Open Mortgage.
"Rates are generally .125% higehr following the jobs report. We had a rate lock advisory coming into this jobs report because expectations for jobs growth were already were so low. Floating into Monday unless we see today's MBS selloff get worse." -Julian Hebron, Branch Manager, RPM 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).