March 21, 2013
Mortgage rates moved gently higher today in what was more of an extension of yesterday afternoon's mortgage market weakness than anything to do with today's trading levels. In fact, bond markets were slightly stronger today as economic data was largely overlooked in favor of reacting to Cyprus-related headlines. That said, MBS (the mortgage backed securities that most directly influence mortgage rates) struggled compared to Treasuries. In general, MBS underperform Treasuries in volatile, headline-driven environments. The day-over-day change in rates was minimal, and there were even a few lenders whose rates were the same or better. This leaves 30yr Fixed, Best-Execution in the same shape as the past few days between 3.625% and 3.75%.
(What is A Best-Execution Mortgage Rate?)
If mortgage markets don't much fancy headline-driven and potentially volatile environments, tomorrow runs the risk of being a challenging day. There are no significant domestic economic reports on the calendar and even if there were, today's trading suggests they wouldn't much matter. On the other hand, there will be plenty of opportunities for European headlines to have an effect with Cyprus continuing its stint in the spotlight as well as a "decision" expected from Italy's president on the formation of a new government (or lack thereof). The upside is that if Europe drops the ball, mortgage rates can still benefit, even if Treasuries are benefiting significantly more. On the other hand, if markets are reassured by the headlines, mortgage rates will likely suffer.
Loan Originator Perspectives
"Consumers are confused today as Freddie Mac's weekly survey reports lower rates. This is source material for all mainstream media on rates, but it's backward looking and expired. Rates have slightly recovered from yesterday's post-Fed meeting rate spike and are even to up slightly on the week despite the deluge of headlines saying rates are down. Macro concerns in eurozone may keep a lid on rates spiking, but the upward rate theme of 2013 prevails for conforming loans. Jumbo loans are more steady because MBS markets for those loans are more favorable." -Julian Hebron, Branch Manager, RPM Mortgage.
"Rate markets on hold today as investors await news on Cyprus' bailout and Italian governmental issues. While we lost some ground following yesterday's Fed statement, at least the bleeding hasn't carried over into today. Have to think there is some short term improvement potential, anyone floating may want to see what weekend events unfold. " -Ted Rood, Senior Originator, Wintrust Mortgage.
Today's Best-Execution Rates
- 30YR FIXED - 3.75%, 3.625% coming back into view
- FHA/VA - 3.375-3.5% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 3.00%, 2.875% coming back into view.
- 5 YEAR ARMS - 2.625-3.25% depending on the lender
Ongoing Lock/Float Considerations
- Rates have risen moderately but consistently since hitting their all-time lows in September and October 2012.
- Regardless of global or domestic economic weakness, the subsiding fear of a disorderly EU breakup will continue to prevent rates from getting back to those lows.
- This is very likely to be the case unless a similarly panic-inducing event were to come into focus, or if a disorderly break-up regained the spotlight.
- Sequestration, negative growth, and generally choppy political and economic environments around the world DO NOT constitute that sort of panic.
- This is a "rising rate environment" until further notice, though pockets of recovery and consolidation can provide smaller-scale opportunities against the larger-scale backdrop.
- (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario. There can be all sorts of reasons that your quoted rate would not be the same as 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).