October 18, 2013
Mortgage rates fell only slightly today, but with yesterday already near 4-month lows, today's moderate improvement makes it official--at least in terms of closing cost. The actual interest rate that the best qualified buyers are likely to be quoted isn't any lower than the previous 4.25% (best-execution). The gains would instead be seen in the form of slightly lower closing costs, or slightly higher lender credit depending on the scenario.
Very little happened today to inspire market movement. There was no significant economic data and no surprising clues about Fed policy. Before, during, and after the shutdown, we've maintained that bond markets are most intently focused on the official Employment Situation Report.
For the past 3 weeks the focus was on the absence of the report, which caused uncertainty. With the exception of the last few days before the debt ceiling deadline, this led to a narrow interest rate environment. With the shutdown over, the jobs report will now be released this coming Tuesday. With it comes our first major cue for interest rate momentum since September 18th.
(Read More about the last 3 weeks in yesterday's recap of government-shutdown mortgage rate movement: Mortgage Rates Much Lower After Debt Deal)
Loan Originator Perspectives
"Great week for mortgage rates amidst all the uncertainty. Fridays aren't typically lock days in my opinion, however with the recent improvements to prices and sitting at the very bottom of the range it is probably a good time to lock. Next week has important data that will either further confirm the move lower and start the march towards lower rates or confirm the resistance levels on the 10 year and reject sub 2.6 yields on the 10 yr US Treasury. This is all speculative, however the trend is your friend...until it's not. Still floating with extreme caution." -Constantine Floropoulos, Quontic Bank
"Rates continue to hang tough as we await next Tuesday's delayed NFP report. We're at our best levels since July, and retaining the last two days' gains encourages secondary desks to pass along improved pricing. Tempting to lock at these levels, those floating need to examine their risk tolerance in case jobs report beats expectations." -Ted Rood, Senior Originator, Wintrust Mortgage
"Oh happy Friday. Rates remain very good. At lowest levels in about four months. The release of NFP (which has been delayed due to shutdown) will be on Tuesday Oct. 22--- it may be a market mover. Stay tuned." -Bob Van Gilder, Finance One Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.25%
- 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/might-not end, as well as a seizing-up of short term funding markets caused unexpectedly high volatility--enough to be felt in longer term rates like mortgages.
- After a deal was reached to avoid going over the debt ceiling, funding markets thawed and rates returned to the same 'wait and see' range that existed before the Fiscal drama.
- Markets continue to be most interested in economic data and it's suggestions about the longer term trajectory of the economy. This will shape expectations for Fed policy in the coming months, and thus inform the direction of interest rates.
- The stronger the data the more likely the Fed is seen as reducing asset purchases. Rates would rise under this scenario, but the most recent FOMC Meeting (and more importantly, the Fed's decision to hold off on tapering, suggests that they'll attempt to keep the pace of rising rates moderate as long as inflation isn't adversely affected.
- (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).