October 16, 2013
Mortgage rates fell today, recovering yesterday's losses on average. Some lenders' rate sheets were just slightly better or worse than yesterday's latest, but nearly every lender had been worse this morning before releasing revised rate sheets in the afternoon. 30yr fixed best-execution remains at 4.375%, though 4.25% continues to make sense for some scenarios, depending on the difference in cost from 4.375% and personal preference.
The promise of an end to the government shutdown took center stage today, helping both stocks and bonds improve vs yesterday. The full effects of a finalized deal won't be known until tomorrow, assuming the House and Senate pass the legislation tonight, as expected.
From a market-watching standpoint it's important to keep in mind that the reason we're seeing an unexpectedly positive reaction to the debt deal in the world of longer term interest rates has much to do with the fact that we had been seeing an unexpectedly negative reaction to the overall fiscal drama as October progressed. Past examples of similar drama suggest that it's usually over-credited as a motivation for longer term rates (like mortgages) when other factors remain more important.
That's not to say that the drama seen so far and the headlines today aren't capable of causing volatility for interest rates, simply that the volatility is likely to be a "wash" when all is said and done. At that point, the expected source of inspiration remains, as ever, the big jobs report that had been scheduled for October 4th.
Loan Originator Perspectives
"Great day to be floating. Certainly the question of lock/float is important as usual as most consumers are hoping the rally continues. The inconsistencies within the rallies and sell-offs of late, lack of data, and government incompetence leave us at an unpredictable scenario on lock vs. float. We are still within the current range, with a strong rally today one should strongly consider locking. Floating is always risky, however there may be more room for improvement here. Float with extreme caution." -Constantine Floropoulos, Quontic Bank
"Here's to hoping the debt limit deal happens and puts an end to our slow leak higher in recent days. Maybe we can now focus on the lack of tapering and economic numbers that should confirm a slowing economy. This will be good for rates. Will also be interesting to see if the NFP report is released any time soon." -Mike Owens, Partner, Horizon Financial Inc
"Rates improved after today's debt deal announcement. Floating borrowers might want to wait until tomorrow unless their lenders have substantial price improvements this PM. Rates aside, it's great to (hopefully) have a short term solution to help those impacted by the shutdown." -Ted Rood, Senior Originator, Wintrust Mortgage
"Congress acts and MBS get giddy (good news for rates), but it may be short lived. As my dad used to say, Tomorrow never comes and yesterday don't matter. If you like your rate quote, take it today." -Bob Van Gilder, Finance One Mortgage
"It seems all markets are pleased with the ability of our government to kick the can just a little further down the road. Rate sheets to start the day were worse than the prior day, but by days end lenders repriced better bringing rates closer to their best levels in several months. In my opinion, the gains with MBS justify better pricing, so I think floating overnight might reward you in the morning. But as always, nothing wrong with locking now especially if you are within a couple weeks of closing." -Victor Burek, Open Mortgage
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).