November 13, 2013
Mortgage rates fell today, erasing yesterday's weakness in many cases. There were no significant events in the morning, but bond markets had already improved overnight in Asia and Europe. The improvements held throughout the US trading day, allowing lenders to offer improved rate sheets compared to yesterday. This keeps the most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution) at 4.375% whereas it had been in transit to 4.5% yesterday.
To make matters slightly more optimistic, Janet Yellen--the nominee to replace Bernanke as the head of the Federal Reserve--will have her confirmation hearing tomorrow in front of the Senate Banking Committee. Her prepared remarks were released late this afternoon and led to further strength in bond markets. It was late enough in the day that most lenders didn't adjust rates sheets, though the gains seen in Mortgage-Backed-Securities would have justified it, had they happened earlier in the day. All other things being equal, this means tomorrow would start out with a bit of an advantage for mortgage rates. Even if rates simply hold steady, it would go a long way toward rejecting the trend higher that's been in force for the past two weeks.
Loan Originator Perspectives
"If you floated overnight, your pricing today should be better. The benchmark 10 year treasury has managed to bounce off resistance at 2.78ish and has moved back below our prior resistance of 2.75ish. At the time I wrote this, it was at 2.72. As always, lenders have been extremely slow to pass along the gains we are enjoying today but a few have repriced for the better. Tomorrow brings us some potential market moving data with jobless claims up first, our final auction of the week and Janet Yellen will be in front of the Senate Banking Committee. If claims come in worse than expected, we should be able to at least hold onto the gains from today. Quite often, following the last auction for the week, we get a rally as new supply is out of the way. If you like the quote you received today, lock in. If you can handle some risk, I think floating overnight is the way to go." -Victor Burek, Open Mortgage
"Some dead cats bounce faster than others, and (after a flat day yesterday following Friday's robust jobs report and rate increases) MBS market regained some lost ground today. A well received 10 year treasury auction helped sustain the momentum, but it will take more than a one day rally to indicate a change in market sentiment. We'll take the gains for now and hope for more tomorrow." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 4.375%
- 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).