May 29, 2013
Mortgage rates recovered somewhat today, after experiencing their worst day in exactly 4 years yesterday (get caught up HERE). Rather than triumphantly charging back into lower territory, the general tenor today has been one of consolidation and catching of breath. It's the sort of pause that stands an equal chance to merely be a pause or to end up being the first indication of a turning point. The landscape of lender price offerings unwittingly confirms this as rate sheets are all over the board compared to yesterday's. Some lenders are right in line. Some are significantly weaker on some of their products, but not on others. Other lenders are quite a bit improved.
All that having been said, the median lender is slightly better off than yesterday, bringing the average Conventional 30yr Fixed rates down just slightly, but not enough to unseat 4.00% as the most prevalent quote (best-execution). Be aware, however, that buydowns to 3.875% and 3.75% can still make a lot of sense depending on the scenario. More than anything, against the backdrop of the recent volatility, we'd encourage you to see how moving to the next rate higher or lower (if possible) would effect your closing costs.
The biggest question on many minds may be "IS IT OVER?" It's tempting--comforting even--to hope that meaningful improvements that follow vicious deterioration mean that a negative trend has finally changed, but as we suggested above, that isn't always the case in life or in rates markets. More profound movement in either direction may now be more restricted by the upcoming data. Markets will view this data as likely to inform the Fed policy that has the biggest immediate impact on rates. Next Friday's Jobs report will have the easiest time moving markets, but a few trial balloons may be sent up in the meantime. We'd be more willing to treat today's progress as a sort of base camp heading into next Friday IF we can follow it up with ground-holding or improvement tomorrow, and especially into the weekend. Obviously, we're not quite there yet.
Loan Originator Perspectives
"Today is a good lock day, not so much from the slight MBS rallly but more from investors offering favorable pricing to fill pipelines. If you look at the MBS chart from the past 2 weeks, it shows that slight MBS rallies like today's are fleeting, so rate shoppers should proceed with caution. " -Julian Hebron, Branch Manager, RPM Mortgage
"After the brutal rates beating, it seems we are getting just a little bit of a relief rally. If I was buying or refinancing, I think I would roll the dice and see what tomorrow brings. Rates fell a long way on what many feel is a misinterpretation of the Fed and Ben Bernanke regarding tapering bond purchases." -Victor Burek, Open Mortgage
"Finally a green day in MBS markets today. We're recovered less that 1/2 of yesterday's losses, but something is better than nothing at this point. We have no expectations of regaining enough ground to approach early May's rates, but at least we had a respectable bond auction today. Borrowers starting loans need to quantify a lock plan with their loan officers, know what pricing they want to lock their loans, and be realistic, knowing that this year's low rates are solely in the rear view mirror." -Ted Rood, Senior Originator, Wintrust Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.00%
- FHA/VA - 3.25% or 3.75%
- 15 YEAR FIXED - 3.125%
- 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 challenged the long term trend higher, but failed to sustain a breakout
- EU and domestic economic data remain relevant to mortgage rates, but uncertainty over the Fed's bond-buying plans through the rest of the year is causing volatility
- The further we've progressed into 2013, the faster the swings have become
- Fears about the Fed's bond-buying intentions were proven well-founded on May 22nd when rates rose to 1yr highs after the Fed confirmed their intention to taper bond buying programs sooner vs later
- Just as the pendulum pushed far to the positive side of the rate range in April, the opposite swing occurred in May (now the worst single month for rates on record since 2008)
- (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).