October 11, 2013
Mortgage rates were flat today, ending the week higher for the second Friday in a row after 3 exceptionally strong weeks in September. Some lenders offered slightly better rate sheets today when compared to yesterday's latest, though others were slightly worse off. Conforming, 30yr fixed best-execution remains between 4.25 and 4.375%. For the best qualified borrowers, 4.375% may well have no origination or discount points whereas 4.25% might. Neither option is better or worse--simply a matter of personal preference.
Compared to last week, we saw more volatility in rates, but only in two concentrated doses on Tuesday and Thursday. Even then, the entire month of October has been exceptionally quiet in terms of day-to-day changes for mortgage rates. While this can be frustrating for those hoping to see lower rates, it does make for an easier lock/float decision (not much incentive to float if rates cease moving lower).
For those with longer term outlooks, hoping to see some more improvement, it all hinges on the events that unfold after the government reopens. The net effect of the shutdown on the economic data may indeed filter through in the coming months, but the important Employment report that we were supposed to get last week was compiled before the shutdown. That not only means it will be an unadulterated glimpse into the health of the labor market, but also that it can be released fairly quickly after the government reopens.
Financial markets care about those implications because the report is the most significant source of guidance for bonds and MBS on any given month. MBS are the 'mortgage-backed-securities' that most directly affect mortgage rates, and investors in the MBS market are hesitant to stray too far from the pack with the looming uncertainty of the employment data. If it's exceptionally weak, this would provide the extra oomph to break below last week's lows.
Unfortunately, the release of the employment data will necessarily be preceded by a reopening of the government. Market-based reaction to today's hopeful headlines would seem to indicate that stocks and interest rates are both ready to move higher if that happens. The movement in rates probably won' be catastrophic, but it will be a slight net-negative that we won't be able to avoid--perhaps as early as next week.
Loan Originator Perspectives
"Wow Friday again. The days sort of blend together during the shutdown--not a whole lot of action. Rates remain in a very tight range. Best execution right at 4.375% on a 30 year fixed. Don't forget Monday is Columbus day. In 1492 he sailed the ocean blue and "discovered" America. Perhaps in 2013 our Govt can too." -Bob Van Gilder, Finance One Mortgage
"No government data on jobs and fleeting glimpses of progress in DC Stalemate left markets wandering back to unchanged this PM after a positive open. Consumer confidence numbers were down, probably not a surprise given the partisan bickering in Washington. Feels like the last two weeks have been wasted waiting for shutdown resolution. Advising clients to lock early when pricing is acceptable, DC Debt Default would be calamitous for rates." -Ted Rood, Senior Originator, Wintrust Mortgage
"Rates are holding firm in the 4.25% to 4.5% range. It looks like the end of shutdown could come as early as Monday which could send rates back up. I am advising to lock and not take the risk." -Chris Marconi VP Residential Lending First Midwest Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.25% -4.375%
- FHA/VA - 4.0-4.25%
- 15 YEAR FIXED - 3.375-3.5%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
- Expectations for "tapering" (a reduction in "QE3" asset purchases) mounted over the summer and September 18th was seen as the most likely day for a potential tapering announcement
- But the Fed decided to keep a change in QE amounts on hold until the economy could more convincingly show that rising rates (which had been rising because markets expected the Fed to taper!) wouldn't be too big an impediment to further improvement.
- That's resulted in the first meaningful "pause" in the "rising rate environment" since it began in earnest in May, 2013. This won't necessarily be an ongoing move in the other direction, and we're nowhere near May's rates yet, but it's a good opportunity to get back in the market if rising rates pushed you out sometime between now and then.
- The extent to which that remains true relies on incoming economic data. Strong data will increase the speculation that the next Fed meeting will contain a reduction in purchases
- (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).