November 25, 2013
Mortgage rates were steady to slightly lower today despite some volatility and weakness in the Secondary Mortgage Market. This means that MBS prices (the mortgage-backed-securities that most directly affect rates) moved higher and lower at a fairly quick pace, and ultimately settled into territory that would indicate slightly higher rates. In fact, several lenders did undergo mid-day price changes that raised costs for existing rates, but not so much as to push rates themselves higher.
Once again, most lenders are very close to the previous session's levels. On average, costs are actually a bit lower due to the majority of lenders who did not change prices mid-day. The most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution) remains at 4.375%.
As we discussed on Friday, this week isn't likely to see any excessive movement ahead of the extended weekend. That's not to say that there couldn't be a shake up in the next 2 days, but in general, the preference among market participants will be to file toward the exits in as orderly a fashion as possible. The downside of this exodus is that there will be fewer and fewer active market participants as the week progresses. That's a much smaller overall cohort than, say, stocks or Treasuries, and it can make for more volatile movement in some cases. The bigger consideration continues to be the economic data in the following week, especially the Employment Situation Report on Friday, Dec 6.
Loan Originator Perspectives
"Rates a tad better than Friday afternoon. Locking not a bad idea, but I'm floating until tomorrow with a bias towards locking if we see an unexpected spike in yields " -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).