December 12, 2013
Mortgage rates moved higher again today, bringing them just shy of the highest rates of the past several months seen last Wednesday. The most prevalently quoted rate is still 4.625% for ideal, conforming 30yr Fixed scenarios (best-execution), meaning today's deterioration is seen in the form of higher closing costs or decreased lender credit.
Freddie Mac's popular Primary Mortgage Market Survey today reported lower rates, week-over-week. While this is certainly possible considering the survey's Mon-Wed response time frame, it is no longer Mon-Wed. Rates were already on the rise yesterday, and in terms analogous to Freddie's, we're only 0.01% off the highest day of rates since September 17th.
Discussing reasons for today's losses would be to make much ado about (almost) nothing. Markets have shown their hand by pulling back from the three days of relative strength beginning last Friday after the jobs report.
In simpler terms, rates were surprisingly improving after the jobs data. This was most likely to be a short term correction to make up for the extra bit of weakness (higher rates) seen before the data, though there was a chance we could have seen continued improvement this week. Those possibilities were squelched with yesterday's weakness. Today merely confirms that.
The next big move for rates--and perhaps the only big move left in 2013, is likely to be seen after next Wednesday's FOMC Announcement.
Loan Originator Perspectives
"Bit of a choppy day with traders and pundits still discussing the Fed's next move. In September, NOT tapering led to broad gains as expectations were for an imminent cutback. The outlook is more neutral now. Tapering will certainly hurt rates, but remaining on hold wouldn't be as big of surprise so gains may be muted." -Ted Rood, Senior Originator, Wintrust Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.625%
- 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.
- 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).