May 13, 2013
Mortgage rates continued higher to begin the week, carrying some momentum from Friday's rapid move higher and taking new cues from a stronger-than-expected Retail Sales report this morning. Rates were already at their worst levels in over a month last week, but today's losses mean we'd have to go back to March 22nd to see similar rate sheets. The best-execution rate for conventional, 30yr fixed loans is now well into 3.625%, though lower rates remain available for additional costs.
With the exception of early March, today's average rates are right in line with the highest of the past 12 months. This morning's Retail Sales report was only a small contributor to that. The most significant event of the past 2 weeks continues to be the Employment Situation Report on May 3rd, which marked a turning point for rates, one day after hitting 2013 lows. We've exploded higher since then and are now seeing uncertainty about Fed policy thrown in the mix.
The 'uncertainty' may or may not turn out to be significant, but either way, won't be adequately addressed until markets get their hands on the FOMC Minutes next week. That leaves the current week at risk of being more volatile, and potentially erring on the side of defensiveness/weakness between now and then. There are several pieces of economic data throughout the week, as well as several Fed speakers that may help moderate the tone in rates markets, but they can just as easily add fuel to the fire.
Loan Originator Perspectives
“The bond market has made higher highs and lower lows (yield/rate) consistently since summer 2012. It is overwhelmingly clear that we are in an overall shift higher in rates. The time frame for the final move to higher rates may still be unknown, and possibly not in the near term, consumers need to consider locking before things get worse as a defensive action for short term time lines.” -Constantine Floropoulos, Quontic Bank
Today's Best-Execution Rates
- 30YR FIXED - 3.625%
- FHA/VA - 3.25% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.75-2.875%
- 5 YEAR ARMS - 2.625-3.25% depending on the lender
Ongoing Lock/Float Considerations
- After rising consistently from all-time lows in September and October 2012, rates are challenging the long term trend higher
- Lingering concerns over European finances have helped keep Core EU rates low, which has some "spillover effect" onto US Rates.
- Domestic economic weakness has played a role in helping balance the outlook for Fed bond-buying.
- We're at a crossroads where we'll soon see if the "rising rate environment" remains intact or is successfully challenged.
- (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).