October 15, 2013
Mortgage rates rose moderately today, bringing them to their highest levels since September 23rd. Though the recent move higher has happened very gradually, it's also been fairly determined with none of the past five sessions seeing a move lower. Today's incremental dose of weakness was notable in that it was finally enough to unequivocally nudge 30yr fixed best-execution back up to 4.375%, though buying down to 4.25% continues to make sense for some scenarios depending on personal preference.
Last week, we'd increasingly noted that rates had no incentive to move any lower without market participants getting their hands on the important Employment Situation Report--the most important piece of economic data each month and recently postponed due to the shutdown. Despite the lack of motivation to move lower, rates held their ground fairly well--remaining in a new range that was distinctly separate from that which characterizes most of the July-September time frame.
At current levels, we're beginning to blur the lines between these two zones of recent rate levels. The outlook will remain blurry until the shutdown ends and the important economic data is flowing again. It continues to be the case that we can't expect a meaningful move lower without a downbeat jobs report.
Loan Originator Perspectives
"Continued leakage in MBS market as rates trudged upward again today. No incentive for them to improve, given the lack of economic data and DC Dysfunction. We're hoping to stay in current ranges, but if rates have suffered with just the perception of any progress in DC, might be wise to expect more of the same if/when actual progress occurs. My consensus: if you like your rate, lock while the getting is good. " -Ted Rood, Senior Originator, Wintrust Mortgage
"The range is still in-tact, however it has moved to a higher threshold. As long as we stay within the range the outlook is semi-bullish. We have an overwhelmingly high risk factor in the status of our government reaching a deal, which can unfold negatively for us either way. If we reach a deal everything is fixed and the risk on trade continues, if we don't reach a deal the US bond market will suffer tremendously. I would cautiously float here, strongly recommend locking, too many unknowns, delayed data points, etc." -Constantine Florpoulos, Quontic 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 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 end have caused pockets of volatility.
- 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.
- The Fiscal drag is also a consideration for the Fed and we believe this to be one of the factors preventing rates from rising more quickly
- Rates moved lower after the Fed held off on tapering, but the window of opportunity may be closing. Ultimately, that will depend on the economic data that's on hold due to the shutdown
- (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).