October 3, 2013
Mortgage rates were relatively unchanged again today, marking the 5th day in a row near current levels. If there's a bias, it has been modestly lower, but only just. This means that some lenders put out their best rate sheets of the past three months, though others were actually a bit higher than yesterday. Overall, the movement hasn't been remotely close to challenging the current best-execution rate of 4.25% for conforming, 30yr fixed loans.
Yesterday's analysis pointed out that bond markets (which speak to mortgage rate movements) were much more interested in the Employment Situation Report than the government shutdown spectacle. Today offered further proof of that as traders opted to make their biggest trades of the week after an important report on the services sector (ISM Non-Manufacturing, which includes a widely-tracked "employment index").
We received official word this morning that, even if the shutdown ends today, there will be no Employment Situation Report tomorrow morning. That had already been a distinct possibility, but it's confirmation put even more emphasis on the week's remaining data.
Interestingly enough, the ISM Data had started both stocks and bond yields moving lower, but they'd paused about 10 minutes later. When the news about tomorrow's cancelled report came out, each side of the market continued with it's previous move--as if the data that actually showed up this week suddenly counted for a bigger percentage of the overall assessment. Actually, that's exactly the case, but it doesn't help clear up much uncertainty going forward. We still don't know if we'll get the data next week or how the subsequent report will be affected.
While this makes it hard for markets to take too much of a stand between now and then, it does mean that the movement that ensues may be abrupt--for better or worse.
Loan Originator Perspectives
"Another day of tame mortgage rates, and we remain near our best levels in months. Nothing to lose by locking here." -Bob Van Gilder, Finance One Mortgage
"DC Drama continued to rule MBS markets today. Despite the uncertainty, we ended near current levels. Nice to see rates still near three month lows, the crystal ball not working well enough to predict whether next move is up or down. Borrowers with loans in progress need to carefully examine their risk tolerance and pricing expectations!" -Ted Rood, Senior Originator, Wintrust Mortgage
"No complaints from me on the lack of volatility. Rates are stable for a change and better than in some time. Can't say the government shut down has hurt rates and the ADP report indicates that the delayed NFP report could be helpful to us. " -Mike Owens, Partner, Horizon Financial Inc.
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).