June 27, 2013
Even though the most common weekly rate survey was out today showing a significant increase in rates, it was merely catching up to the move we already reported on Friday. Today, however, mortgage rates actually surged lower , capping an almost triumphant 3 days spent earning back some of last week's losses. We're now somewhere between last Thursday and Friday's levels on average, though we'd emphasize that there's still a significant amount of lender-specific variation in the day-to-day movements. While lenders may be moving at different paces relative to their previous rate sheets, you'd be hard pressed to find one that wasn't significantly lower today vs yesterday. The improvement was enough to bring 30yr Fixed best-execution down a full eighth of a point to 4.5%!
This is the sort of improvement vs recent high rates that we'd hoped to see come out of the past two days of consolidation. There was no way to be sure it would happen, and borrowers who locked in the past few days should NOT second guess that prudent decision! If a team of the most successful traders on wall street were tasked with simply deciding to lock or float any ONE loan with no means of hedging that risk, they would absolutely have done the same given the current level of volatility.
It's possible that rates continue to improve between now and next week's anticipated market movers on Wednesday and Friday, but here's the important thing to remember: Just because rates were much lower for most of our recent memory, and just because they've moved lower for 2-3 days in a row, it doesn't mean that they are determined to make it back to those past levels. Markets are still in the process of assessing whether or not a long term shift has been made, and nothing that we've seen in the past few days (OR that we can see tomorrow) would rule out that possibility. It has been and continues to be the case that those risks will be solidified or mitigated by next week's Jobs report.
Though markets have exhaled somewhat, and moved partially back lower in rate, the overall move of the past 2 months is one of the fastest ever 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
"Once again which way are rates going? Good question, but it looks like the recent jump is relaxing a little to the down side. Let's hope this continues as we make a move back towards 4%. " -Mike Owens, Partner, Horizon Financial Inc
"I'm also hesitant to mention it (for fear of jinxing the market), but we have solid gains across the board in MBS Land today. Even the 3.0% coupon, which was devastated last week amid rising rate expectations, is outperforming today. Bottom line, while we're still below last week's best levels, market sentiment has swung in our favor. Will float new applications at least short term, but with a finger poised to lock if necessary." -Ted Rood, Senior Originator, Wintrust Mortgage
"After several weeks of a steady climb in rates, we are now looking at back to back days of decent improvements. I am not ready to call this a reversal, but I am more optimistic. I am still advising my clients to lock their rates in but offering an option to relock in rates continue to improve." -Kenneth Crute Branch Manager Prime Mortgage Lending Inc
Today's Best-Execution Rates
- 30YR FIXED - 4.5%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 3.625%
- 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).