June 3, 2013
Mortgage rates barely budged today, but only when comparing the most recent batch of rate sheets to Friday's latest. Between now and then, there's been an exceptionally high level of volatility. On the one hand, volatility has been and continues to be expected. On the other, simply expecting volatility doesn't do much to mitigate its ill effects. Particularly, the mortgage-backed-securities that most directly influence rates are sensitive to volatility, as are the rate sheets put out by mortgage lenders. 4.0% remains as the best-execution rate for 30yr Fixed, Conventional loans. Lower rates are still available and paying additional upfront costs to move lower in rate may make sense for some borrowers.
With respect to today's volatility, rates markets started out in fairly bad shape, but improved significantly into the noon hour only to lose all the gains by late afternoon. As an example of how volatility wreaks havoc on rate sheets, it's worth noting that many lenders are actually priced worse than they were this morning, even though underlying markets haven't crossed the line into any weaker territory. To reiterate that which has already been said, we'd continue to plan on volatility--particularly with respect to the fragility of improvements--until at least Friday afternoon (at which point we'll have our next major dose of information after the Jobs report).
Loan Originator Perspectives
"MBS volatility reigns and a sustained rally is elusive. Today is a perfect example: MBS are now down as much as they were up this morning. Overall, the sentiment is switching from “will rates drop?” to “will the rate rise be contained?” Rate locking opportunities continue to be more from investor pricing incentives to keep volume up rather than from any MBS rallies. Rate shoppers should continue to be cautious about this dynamic. One benefit of higher rates: potentially less demand from buyers in overheated housing markets." -Julian Hebron, Branch Manager, RPM Mortgage
"Yes for originators, it has been a roller coaster as we follow the up and down of MBS prices through out the day. Borrowers don't see this unless they are getting a quote in the morning and then again in the afternoon. They just see the price quoted once a day and can plot the upward movements accordingly. I think the ADP report on Weds could be a good indicator of Friday. If that prints to the low side, we may see adjustments to the Friday consensus #. This could be good or bad, but the markets will move, I think, based on the ADP number. This will be a chance to lock before Friday. Odds of improvement Friday come from a big disappointing number. But I don't like those odds." -Mike Owens, Partner, Horizon Financial Inc.
"Another unsettled day in MBS Land as Fed Speak continues to spook bond traders. We opened stronger (with many lenders repricing better) only to see gains quickly evaporate. Not sure if we've defined the bottom of this market, but we certainly have some pretty consistent resistance to rates recovering much ground. Still advising folks to lock at application if pricing is adequate for their loans. We can hardly put a good day together, let alone a streak of them!" -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).