November 29, 2013
Mortgage rates edged just barely lower today, but remain close to the recent highs seen on Wednesday. Along with November 12th, these 3 days contain the highest rates since the September 18th FOMC Announcement where the Fed held off on reducing asset purchases. On a positive note, despite the two month highs, they're not far off from most of the recent activity. Today's most prevalent rate quotes are going out between 4.375% and 4.5% for top tier scenarios (best-execution), whereas most of the recent activity was 4.25%-4.375%. Many lenders are closed today or are otherwise not issuing new rate sheets.
With today's slight improvement, the week ends up looking rather flat in terms of overall movement from last Friday. This is about what you'd expect given the absence of significant events this week and extremely important events in the week ahead. Next Tuesday is the only day next week that does NOT contain an important economic report in the morning. Friday hosts the Employment Situation (aka "jobs report, official employment data, NFP") which is the most important economic report for the rest of the year.
Investors increasingly believe the Fed may move to reduce asset purchases in December if the upcoming jobs report is strong enough, though a great deal of debate remains. If that happens, it would likely result in an immediate move higher for rates--perhaps significantly. Investors will draw conclusions about the Fed decision almost immediately on Friday and may begin leaning in one direction several days in advance. The point is that we're going from what has been a very flat few weeks to a potentially much more volatile December.
Loan Originator Perspectives
"If you haven't locked yet, you shouldn't (or probably can't considering many lenders lock desks are not even open) lock today. Enjoy the weekend and let's see what happens early next week when there is substanial volume to make a case for where MBS prices go from here. We still seem to be holding the top of the recent range for the 10 year yield of 2.75ish and I am hoping that presents itself as resistance and a nice bounce back lower in yield may follow. " -Steve Chizmadia, Mortgage Consultant, American Capital Home Loans.
"Light day to end the week. 30 Year fixed stuck firmly at 4.5%, 15 Year 3.375%. I am advising caution and locking in as all eyes turn towards next Friday's job report." -Chris Marconi VP Residential Lending First Midwest Bank
"Not much to say about today. The markets are open, but thinly traded as most of the key players are on extended break until Monday. As is typical, the lenders that did price today worsened sheets considerably. Float til Monday." -Victor Burek, Open Mortgage
"An abbreviated post Thanksgiving session was quiet today, many lenders and lock desks sleeping off yesterday's dinners. Been a great year for borrowers and originators. Whether rates trend up or down, need to remember we're blessed to live in a country where housing is generally affordable and assessable. Happy Thanksgiving, everyone." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 4.5%
- 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).