June 26, 2013
Mortgage rates added a second day of improvement to yesterday's more tentative gains, falling just slightly faster than any other day this month. While the improvements scarcely make a dent in the recently severe collection of losses, they're part of the consolidation that would necessarily precede any attempt to bounce back. The question remains whether or not such a bounce back is in the cards, and that may not get a fully informed answer until next week. That doesn't mean we can't improve in the short term, however, and today is evidence of that as 30yr Fixed best-execution fell out of 4.75's reach and is once again centered on 4.625%.
Markets were somewhat motivated by today's GDP data, but we saw plenty of evidence of the bigger picture ebbs and flows being in place regardless of data. That evidence points to the consolidation that's taking place heading into the last trading day of the quarter on Friday. The economic data can still play a part in pushing rates higher or lower within that bigger range, but that range is more likely to define the highs and lows that are possible for the rest of the week. The conclusion is that we're temporarily in the most balanced position we've seen since before the FOMC events that kicked off all the nastiness.
This doesn't necessarily mean we've turned the corner, but we have leveled off for now. For safety seekers, this is a good opportunity to lock. For risk takers, this is sets up a baseline from which to take more risk, provided you lock if rates move back to yesterday's levels or above. Unfortunately in this environment, those levels could be overshot significantly with one rate sheet. For those of you simply watching rates and "hoping" for an improvement, there is still some hope, but markets are still clearly being cautious about next week's Jobs report, and barring the unforeseen, don't look eager to undertake a significant correction before then.
Even with today's improvements factored in, the overall move of the past 2 months continues to be one of, if not THE most significant move in the modern history of mortgage rates (in terms of the pace of change). Instead of retelling the "story" of this crash, we'll simply catalog some of the recent relevant discussions for those wanting more background on the abrupt movements:
May 22nd: Why Did Mortgage Rates Skyrocket Past 2013 Highs on Wednesday?
May 28th: Mortgage Rates Vault Catastrophically Higher
June 19th:Mortgage Rates Annihilated; Brief History of All-Time Lows
June 21st: Nightmare for Mortgage Rates: Way Worse Than Freddie Told You
Loan Originator Perspectives
"Everyone wants to know if rates will come back down and no one knows for sure. I'm locking everything to avoid any risk and will use float down options if rates happen to improve. With a short holiday week coming up and the jobs report on Friday, locking is the smart move. " -Mike Owens, Partner, Horizon Financial Inc
"We almost repeated yesterday's movements in MBS markets today with a strong open followed quickly by losses, but in this case, we stabilized and look to end the day with gains for the first time since 6/18. Whether the gains continue or not, at least we are (for now) putting a ceiling on rates. Not taking anything for granted here, and will still strongly suggest locking sooner rather than later for new clients, but at least we're no longer dealing with rates worsening 3X/day as we did last week!" -Ted Rood, Senior Originator, Wintrust Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.625-4.75%
- FHA/VA - 4.25-4.50%
- 15 YEAR FIXED - 3.75%
- 5 YEAR ARMS - 2.875-3.375% 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
- Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
- Fears about the Fed's bond-buying intentions were proven well-founded on May 22nd when rates rose to 1yr highs after the Fed indicated their intention to taper bond buying programs sooner vs later
- The June 19th FOMC Statement and Press Conference confirmed the suspicions. Although tapering wasn't announced, the Fed made no move to counter the notion that they will decrease bond buying soon if the economic trajectory continues
- Rates Markets "broke down" following that, as traders realized just how much buy-in there was to the ongoing presence of QE. These convulsions led to one of the fastest moves higher in the history of mortgage rates and market participants have not been eager to be the among the first explorers to head back into lower rate territory until they're sure they'll have some company.
- (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario. There are many reasons a quoted rate may differ from 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).