December 16, 2013
Mortgage rates were unchanged yet again to begin the new week, 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 financial markets that underlie mortgage rate movements customarily grind to a halt during the last few weeks of the year and today was no exception. Wednesday almost certainly will be an exception, however, as the Fed releases the policy statement that may mark the first reduction in the QE3 asset purchases that began in September 2012.
While markets have done much to prepare for such a day, surveys suggest there's only a 33-49% chance it happens this week. Thus, if it does happen, it would likely have a negative effect on rates. The extent to which a "no taper" decision would benefit rates is a bit harder to predict, but progress toward lower rates is generally harder fought in this environment where rates are expected to move gradually higher.
Either way, today's and tomorrow's rates may be not be seen again for several weeks (or longer) depending on how Wednesday goes. While this is far from likely, it's infinitely more possible than it is on your average Monday/Tuesday.
Loan Originator Perspectives
"All eyes on FOMC as Wednesday's Statement looms. We lost ground from open to mid PM, and some lenders recalled early rate sheets. Can only hope that taper news is priced into the markets as we're already near 4 month highs on rates. A dovish Fed statement could reverse recent losses, but not expecting one." -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).