March 8, 2013
Mortgage rates vaulted higher today at their fastest pace since late January, after the Employment Situation showed an unexpectedly high number of jobs created in February. The Employment Situation is the most important piece of domestic economic data each month and always has the potential to greatly impact markets. This was indeed the case today, and it brings 30yr Fixed Best-Execution up to 3.75% for the first time since May 2012. Lenders are still offering lower rates, but at greatly increased costs. For every $100k in loan amount, you'd pay an extra $700 of closing costs to keep yesterday's rates at an average lender. On average, the costs associated with 3.625% yesterday are the same costs associated with 3.75% today.
(What is A Best-Execution Mortgage Rate?)
Unfortunately for mortgage rate watchers hoping for lower rates, today's moves go a long way toward further confirming the longer-term upward trend in rates that we've been discussing for several months (Everything in the the "ongoing lock/float considerations" below has been dead on and continues to summarize our stance). It's by no means the final nail in the coffin, but it's increasingly the case that the global economic environment would need to be faced with threats of a similar nature to the past few years of European stability concerns or benefits of a similar potency to ongoing quantitative easing (absent the current discussions of tapering Fed purchases of long-term debt). The latter looks unlikely and the former is at least not on the table for now. So rates continue to rise. Risk-takers would be better justified in a decision to float this weekend than any other time in the past 2 weeks, but there's no guarantee that rates won't continue to move higher next week.
Loan Originator Perspectives
"Rates up again today, which is no surprise in this corner. Every economic report released is seemingly stock bullish and bond bearish these days. While we're not losing massive ground in single bunches, we're like a leaky boat; every day there's more water in the hull. Hate to sound like a broken record, but every loan I have is locked, and intend to stay that way until the trend breaks." -Ted Rood, Senior Originator, Wintrsut Mortgage.
"Since all of my clients are locked only the new ones have to deal with the higher rates out today. Hard to say if we see a breather on Monday with an improvement or not. I would normally say lock no matter what day it is, but since it's Friday and the damage is done we might as well wait to see what happens on Monday. This could be a short lived run up (I hope) since the jobs reports looked this good last year only to disappoint as the year progressed. The difference now is the Europe is no longer on the radar at least until it is again. " -Mike Owens, Partner, Horizon Financial Inc.
"Rates are up .25% this week and up .5% for 2013. For consumers still holding for rates to drop, today is a good day to re-read my MortgageNewsDaily piece from January 21: Wake Up Call: Free Refi Boom Almost Over" -Julian Hebron, Branch Manager, RPM Mortgage.
Today's Best-Execution Rates
- 30YR FIXED - 3.75%
- FHA/VA - 3.375-3.5% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 3.00%
- 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).