October 2, 2013
Mortgage rates were flat to slightly lower today, depending on the lender. Taken together with the previous three days, it would be more than fair to say rates have gone dead flat since bottoming out on Friday. Uncertainty is a major factor in the lack of movement, not necessarily because of the government shutdown itself, but because the shutdown may prevent traders from reacting to the big jobs report scheduled for Friday. It is, as yet, unclear whether or not the jobs numbers will be released if the shutdown ends before Friday morning.
Conforming 30yr Fixed rates remain most efficient (best-execution) at 4.25% though some lenders have attractive buydowns to 4.125% while others remain at 4.375%.
We'll get some small chance to gauge how interested markets may be in economic data vs the shutdown tomorrow morning. Why is this important? Because the whole media frenzy surrounding the shutdown belies what bond markets really care about, and bond market momentum is essentially mortgage rate momentum.
So what do bond markets care about? While the shutdown drama has had a small effect (likely helping rates move a bit lower last week), the official Employment Situation report is a much bigger potential source of inspiration. This, more than any other piece of data, will inform Fed policy, and Fed policy changes will have an instant effect on rates.
In other words, we need to know what the jobs numbers are before we can even begin to speculate on how the Fed's current stance on asset purchases may change at the end of the month. It's try that the presence of the fiscal drama could persuade them to maintain a more cautious approach (good for rates), an impressive jobs report could challenge that notion. Rates are hesitant to move lower too quickly until they know such a move will be justified by the data.
Loan Originator Perspectives
"For some lenders, rates are set in the range of 4.375 - 4.5 but can't get to 4.25% yet. I will continue to advise customers to float with a close eye on D.C. " -Chris Marconi VP Residential Lending First Midwest Bank
"Markets (and lenders) still digesting the DC drama and its impact on loans. While MBS pricing improved slightly, appears borrowers may not see a direct improvement with rates offered. Bottom line: if you're a buyer, rates are significantly better than last few months. Delaying your purchase risks both higher sales prices and mortgage rates." -Ted Rood, Senior Originator, Wintrust Mortgage
"Weaker employment data allowed rates to rally, but as the day progressed most of the gains evaporated. Most lenders are priced about the same today as yesterday. We continue to be range bound and it will take weaker employment data for rates to really move lower. I continue to favor locking if within 15 days, and floating longer closings. With the government shut down, the Bureau of Labor Statistics will not be releasing the employment data on Friday which should keep us range bound for the near term." -Victor Burek, Open 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 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).