December 13, 2013
Mortgage rates were unchanged today on average, and thus remain near recent highs with 4.625% the most prevalently quoted rate for ideal, conforming 30yr Fixed scenarios (best-execution). Some lenders are well-enough priced that 4.5% is available, but it should be noted that most lenders currently have big buydowns to move lower in rate right now (meaning it can cost nearly 1% of the loan amount to drop the rate by .125%).
The sideways movement into the end of the week is consistent with our sense of what's been happening in the rate world since last Friday's big jobs report. That data was tremendously important because, had it been strong enough, it could have made a more compelling case that the Fed would begin reducing the amounts of the Treasuries and Mortgage-Backed-Securities (which directly affect mortgage rates) it currently buys.
While markets generally seem much more prepared for so-called "tapering" than they were in June, whenever it finally happens, it will still mark the turning of a corner on the path to higher rates. That would likely have quite a negative affect on rates were it to happen in December (as some feel it might) versus the consensus view of March 2014.
But the jobs data wasn't outrageously stronger than expected--certainly not enough to suggest that December tapering is any sort of guarantee. Heading into that report, rates were in a position to absorb stronger numbers still, and thus embarked on a short relief rally. That rally ran out of steam on Wednesday and rates have proceeded to settle down right between the highs that preceded last Friday's jobs numbers and Tuesday's 'relief rally lows.'
As has been the case ever since the jobs report (but increasingly clearly as the week has progressed), 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
"Slow end to a blah week in MBS Land as thoughts of Fed tapering danced through bond traders' heads. Been a great year for buyers, agents, and loan officers. We'll see where 2014 takes us, appears market has little/no direction between now and next Wednesday's FOMC statement. With rates at/near 4 month highs, hope is that some tapering is priced into current rates. We'll find out one way or the other next week." -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).