November 21, 2013
Mortgage rates may have managed to hold steady to slightly lower, but it's important to understand that today's rates are still significantly higher than Tuesday's. In fact, there have only been two days with higher rates in the past two months and yesterday was one of them.
This assessment runs counter to today's weekly Primary Mortgage Market Survey from Freddie Mac, which characterized rates as being lower this week. This can happen because of the fact that Freddie accepts weekly survey responses from Monday through Wednesday and receives most of those responses earlier in that time window. That means that if rates jump significantly on Wednesday or Thursday that Freddie's average 30yr rate can move in the opposite direction of the true week-over-week change in mortgage rates, as is the case today. You can view a chart that compares Freddie's survey as well as the MBA's to our more timely collation of actual lender rate sheets at the following page:
Comparison Chart: Freddie Mac and MBA weekly rates vs MND's Daily rate.
What does "significantly" mean? In statistics In this context, a move of .125% is significant because it's highly uncommon for lenders' rate sheets to change by a full eighth of a percentage point in rate from one day to the next. That's what we saw yesterday, and it was indeed significant for anyone currently in the mortgage market. A jump from 4.25% to 4.375% may look fairly tame on your computer screen, but when it would cost the average borrower several thousand dollars to get back to the previous day's rate quote, it's significant, not to mention the fact that it's infrequency makes it statistically significant as well.
The pain eased somewhat today. Although the most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution) is now easily back up to 4.375%, the borrowing costs associated with that rate are slightly lower than they were yesterday. Several lenders recalled rate sheets an improved pricing during the day.
Loan Originator Perspectives
"Small gains in MBS Land today as Philly manufacturing report fell short of economists' expectations. While we're still far from pre-Fed minutes' levels, at least we haven't continued to lose ground. Will take several days or more of determined gains to reverse Wednesday's losses. Let's hope we get them!" -Ted Rood, Senior Originator
"Made it through another week sub 3% on the 10 year. Most loan officers and consumers dont recognize the relevance of the benchmark treasury yield staying below this threshold. In-between we may fluctuate from 2.5-2.8, or whatever the range consolidates to, but the key element is 3%, for now. Although we sold off substantially in the recent couple of weeks, we are still below the high and must consider locking before we cross that level again. Stock market is strong, sentiment is strong, I wouldn't expect much bullishness into treasuries going into the holiday season. I'm floating into the weekend." -Constantine Florpoulos, Quontic Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.375%
- FHA/VA - 4.25%-3.75% (depends heavily on lender)
- 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).