October 4, 2013
Mortgage rates were slightly higher today, but remained well within the extremely narrow range that dominated the week. Conforming, 30yr fixed best-execution remains at 4.25% with the losses being seen primarily in the form of higher closing costs or lower lender credit.
Wednesday's commentary, Mortgage Rates Paralyzed by Uncertainty, noted that the government shutdown headlines were more of a diversion compared to what bond markets (which drive interest rates) are really interested in: the official employment data. The shutdown was relevant, however, in that it prevented those numbers from being reported today!
This paved the way for the mortgage rate paralysis to continue right through the end of the week. This phenomenon isn't isolated to the mortgage world either. The entire bond market (the Mortgage-backed securities that influence mortgage rates are part of this) has essentially ceased risking movement above or below clearly defined ranges. Economists are lamenting the absence of data as precluding the decision-making process, and none of it is seen ending until the shutdown does.
That hasn't been an altogether bad thing for the mortgage world. While some loan processes have been affected, most are able to proceed. Additionally, incessantly flat rates at the best levels in 3 months never hurts. It also allows what had been a fairly brisk three weeks of improvement to catch its breath (which helps lenders margins stay tighter than they otherwise would be, and tighter margins are a net-benefit for rate sheets).
Bond markets will still be waiting on the employment data, which has yet to be rescheduled (and can't be until the shutdown is over). While this does help keep rates from moving too much, the movement that ensues may be abrupt--for better or worse.
Loan Originator Perspectives
"NFP canceled due to govt shutdown...no news, is no news. Markets slightly weaker today, but remain resilient. Hope your Fall weekend is fabulous. Things should be busier next week and rates should be moving more." -Bob Van Gilder, Finance One Mortgage
"Non Farm Payroll report today had negligible impact on rates, probably because Labor Department didn't release it. Pricing tapered off this afternoon, but stayed within recent ranges. Will be difficult for bond markets to establish any positive momentum until the DC Drama is resolved. Tempting to lock up gains, short term upside to floating seems minimal." -Ted Rood, Senior Originator, Wintrust Mortgage
"The week is ending on a down note for rates (in that they moved slightly higher). Bonds opened weaker and moved lower in price throughout the day (higher in rate), but still remain in the current range that has held up throughout the last week. No real cause for the weakness, just range trading. I like floating over the weekend to see if Monday we can test the other end of the range. " -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).