November 22, 2013
Mortgage rates were steady to slightly lower today, though they remain elevated on the week (read more...). Most lenders are effectively unchanged compared to yesterday's latest rate sheets, but some are offering moderately lower closting costs for the same interest rates. The most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution) remains at 4.375%, with some lenders closer to 4.5%.
It was a quiet day for financial markets, offering little motivation to the Mortgage-Backed-Securities (MBS) that most directly affect mortgage rates. Most of the week's volatility was seen on Wednesday, heading into and out of the FOMC Minutes (more...). Yesterday and today have played the role of the epilogue, offering some consolidation and closure to the main storyline that played out on Wednesday.
Next week, then, is something of an interlude as it's not likely to see any excessive movement ahead of the extended weekend. After that, the first week of December will be massively important for the interest rate outlook as there's plenty of economic data right from the outset and the biggest data of all with Friday's Employment Situation Report. The tenor of that jobs report may well inform the Fed's decision to taper or not to taper 2 weeks later. Most market participants will draw their conclusion at the time of the jobs data, however, so the movement in rates could be extreme.
Loan Originator Perspectives
"As is often the case on Fridays, it's a sleepy, illiquid afternoon in bond markets. We logged slight gains, good to see no further losses after Wednesday's Fed minutes sell off. For better or worse, we're range bound near 2.75% on 10 year treasuries; MBS market is assuming Fed taper in next few meetings. Short market week for Thanksgiving looms, next likelihood of any huge market shift is NFP Dec 6." -Ted Rood, Senior Originator
"Nice way to end the week. After the huge selloff following the FOMC statement, mortgage backed securities have managed to regain almost half the losses. As is typical for a Friday, lenders will be extremely slow to pass along the gains today, if at all. I like floating over the weekend, but be prepared to lock early in the morning depending how the trading is going. We do get pending home sales early on Monday which could spark a movement in either direction depending on how the report looks." -Victor Burek, Open Mortgage
"Sure feels like a victory today as we move further from 2.80 and look to make a move below 2.75. Keep in mind the relevance of the "risk in" component that has been clearly overwhelming the markets and will probably continue to do so. Floating into Monday is the general consensus around here, but strongly consider the risks of yields rising towards 3%. Once we cross 3% and stay above 3%, the market will look to push to more normalized rates.....4% 10 yr yields will come faster thank you think. " -Constantine Floropoulos, Quontic Bank
"Locking when you can still makes sense to me, but floating until Monday shouldn't hurt. Seems rates will continue a migration higher. Next week could be slow and volatile and then the week after the jobs report which will have a huge impact on tapering and rates. Can't get complacent so have a target and pull the trigger when you get there." -Mike Owens, VP of Mortgage Lending Guaranteed Rate, inc.
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).