October 30, 2013
Mortgage rates began the day lower, with several lenders releasing their best rate sheets in nearly 5 months. The day progressed well in the secondary mortgage market with MBS prices (the "mortgage backed securities" that most directly affect rates) rising steadily into the Federal Reserve's policy announcement. When MBS prices move higher, rates move lower.
The Fed wasn't seen as likely to change monetary policy in any way at this meeting, but market participants may have justifiably been expecting a more cautious tone than they got. The Fed even removed verbiage alluding to the risks associated with recently tight financial conditions. Bond markets, including MBS, weakened quickly following the announcement, and many lenders revised rate sheets to fall more in line with yesterday's.
This is interesting because yesterday, we'd looked forward to today's data and events as holding the most promise for breaking the ongoing trend of "unchanged" (or close to it) rate sheets. As it happened, we did get a break of that monotony this morning, but rates returned to the same levels in the afternoon. As such the most prevalent Conforming 30yr fixed rate (best-execution) remains at 4.125%.
Loan Originator Perspectives
"Fed Statement released today confirmed markets' conviction that tapering is on hold pending improved data. Rates did lose some ground (after AM gains) following the Fed release, but stayed within recent ranges. Nice opportunity for buyers and refinance borrowers to obtain the lowest best execution rates since June, loan volume picking up as borrowers moved to obtain these desirable rates." -Ted Rood, Senior Originator, Wintrust Mortgage
"Following the FOMC statement, the rates markets took a turn for the worse, but not sure why. I think the losses today will be recouped over the next day or so. If you were unable to lock prior to the FOMC statement and the reprices for worse that followed, I would float over night as I suspect we will get most of these loses back." -Victor Burek, Open Mortgage
"I've been on a stream of recommending locks and exercising them for clients over the past several days. My bias is lock at this point, and today's FOMC announcement rattled the market, so my clients are happy. Outside of 45 day lock, I'd still recommend the client watch and try to get inside of 30 days. For those happy with the rate, lock now, don't look back." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
Today's Best-Execution Rates
- 30YR FIXED - 4.125%
- FHA/VA - 3.75-4.0%
- 15 YEAR FIXED - 3.25-3.375%
- 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 its 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. The delayed release of the September jobs numbers on October 22nd helps confirm that.
- (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).