November 12, 2013
Mortgage rates rose slightly today, extending the losses suffered after Friday's strong employment data. There was no new reason for rates to move higher today and what little movement we saw was attributable to leftover momentum from Friday. The most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution) inched closer to 4.5%, though 4.375% remains available in some cases.
Bond market trading (which indirectly informs mortgage rates) was calm and contained today. Of all the possibilities for the day after a strong jobs report, this is one of the more palatable. The best way to look at it is follows: there was an absence of new negativity, but insufficient evidence of positivity. In other words, the pace of weakness subsided, but it hasn't reversed.
Loan Originator Perspectives
"The trend is not our friend right now. Support at 2.75 has been broken, but seems we have more support at 2.78ish. Today's auction was well received by investors but if tomorrow's auction is received well we could have a nice rally. I think floating all loans over night is worth the risk as we have no major data coming out tomorrow." -Victor Burek, Open Mortgage
"It was a quiet day in rate markets today on the heels of Friday's selloff. Momentum still points to rising rates, we'll need some poor economic data to change that. Tomorrow promises more excitement with weekly jobless claims and a 30 year Treasury auction. Remember, the trend is the trend until it's not anymore, and the trend is higher rates at the moment." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 4.375 - 4.5%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 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 Fiscal Policy has been making for a tough interest rate environment where we're not seeing sustained improvement unless it's a correction to even bigger deterioration.
- The Fed's bond buying is the key consideration--not just the initial reduction (aka "tapering"), but the general pace of withdrawal. We've gone from tapering being a "sure thing" in September, to it being on hold until March 2014, and now December 2013 is increasingly possible after the most recent Employment report on Nov 8th.
- 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 Fed indicated its cognizance of high rates creating headwinds for the recovery, and this suggests 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).