June 17, 2013
Mortgage rates rose in the afternoon, after beginning the day unchanged to slightly higher compared to Friday afternoon. That means lenders recalled their initial rate sheets from this morning and put out new sheets with higher costs. This is typically a result of market volatility and today is no exception as market participants are anxious for Wenesday's FOMC Announcement and press conference. The revised rates in the afternoon are in line with Thursday's offerings, suggesting best-execution rates between 4.125% and 4.0%
Considering that Friday's rates were the best of the month, today's deterioration still leaves us in slightly better-than-average shape with respect to the recent range. Even so, the range of rates in June has been rather narrow compared to May. There's a clear sense of anticipation building for Wednesday's FOMC Announcement. It continues to be a tremendously important market event--one that could send rates well above recent highs, or help us recover a substantial portion of recent weakness--and the volatility this afternoon speaks to the level of anxiety.
Any decisions regarding floating or locking must be based on the understanding that the post-FOMC movement can be big and the event itself could set the tone for at least the next 3 months, depending on what's said. Accordingly, if you need/want to be done with your loan process within the next 3 months, you're main decision right now is simply whether or not you'll roll the dice into the Fed Announcement. The payoffs involved are relatively larger than recent dice-rolling opportunities, but the risks are equally large. While there's always some chance that any hugely important calendar event will fail to inspire significant movement in either direction, few events run the risk stamping a multi-month ceiling or floor on rates markets. This one does.
Loan Originator Perspectives
"The Fed has sent so many mixed messages to the market that I don't expect clarity after Wedneday's FOMC meeting, and I also don't expect a "the economy is getting worse" type of surprise that would send rates lower. As such, we locked new purchases coming out of weekend today, and expect to keep a locking bias ahead of Fed." -Julian Hebron, Branch Manager, RPM Mortgage
"I can't imagine the FED is comfortable with the overnight increase in mortgage rates. I do believe the FED will try to calm the markets down and we will see a dip in rates. This is about the only time I will suggest floating and the lock button will be within easy reach if things look to go south on Weds afternoon. The big risk to this approach is that the recent rise in rates might not look like as much of an issue to the Fed as it does to mortgage markets." Mike Owens, Partner, Horizon Financial Inc.
Today's Best-Execution Rates
- 30YR FIXED - 4.0 - 4.125%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25 - 3.375%
- 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).