October 21, 2013
Mortgage rates rose modestly today, but remained in line with the lower levels seen since last week's debt-ceiling deal. The difference between today's rate sheets and Friday's latest is minimal, and only detectable in terms of closing costs. The actual interest rate that the best qualified buyers are likely to be quoted remains at 4.25% (best-execution).
The markets that underlie mortgage rates were relatively calm today, even if slightly weaker. Volume was extraordinarily light, further building the sense of anticipation over tomorrow's already-hotly-anticipated Employment Situation Report. This data was originally scheduled for release on October 4th but was postponed due to the shutdown.
Even if markets weren't experiencing withdrawals for significant economic data, this report would still be incredibly important--often setting the tone in interest rates until the next jobs report comes out. Keep in mind that the most important part of tomorrow's data is not the unemployment rate but rather the "nonfarm payrolls" component. If job creation is much stronger than expected, rates will likely move higher. If weaker, rates could continue their downward trend.
Loan Originator Perspectives
"Tomorrow's employment report is causing bond markets (including mortgage rates) to take a cautious approach today after moving significantly lower last week. Current levels in mortgage rates or the 2.60 level in 10yr Treasuries are like lines in the sand with rates ready to move either direction after tomorrow's jobs number. We would recommend locking loans closing within 10-15 days as a precautionary tool, and cautiously floating the rest of our pipeline." -Constantine Floropoulos, Quontic Bank
"All eyes on tomorrow's August NFP report. Would take a big miss or hit to dramatically impact rates as we continue to track current ranges, but given the lack of data during the DC shutdown, market reaction may be pronounced. As with all NFP eves, borrowers happy with their pricing may want to lock today." -Ted Rood, Senior Originator, Wintrust Mortgage
"Tomorrow we get the delayed September jobs report. The non farm payroll report is the most watched of all reports and can definitely move markets in a big way which makes it highly risky to float through it. I would definitely recommend locking if you are within 15 days of funding. Longer term closings should also consider locking to remove all risk but I would not be opposed to floating if closing in more than a couple weeks." -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 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).