June 6, 2013
Mortgage rates improved today, bringing them back in line with the week's lower levels from Monday. It's worth noting, that Monday's rates were the highest in 14 months at the time.
Today's improvement wasn't attributable to one standout event. Rather the broader collection of circumstances led to some violent convulsions in currency markets. Other corners of the financial world got on board with the movement, all while nervousness reigns supreme ahead of tomorrow's massively important Employment Situation Report. When all was said and done, Mortgage-Backed-Securities (or "MBS" which most directly influence mortgage rates) were in noticeably better shape than yesterday after beginning the day noticeably weaker.
This small-scale reversal of fortune was only good for a return to Monday's rates, but many borrowers may have wished to have access to such a thing yesterday. For them, it will make sense to take the risk posed by tomorrow's data out of the equation and lock in. Risk-takers (and it's a big risk), may certainly be rewarded if tomorrow's data disappoints markets (because weaker job growth connotes lower rates in general). There's a temptation to view today's positivity as some sort of early indication that markets are keen on returning back to recently lower interest rate ranges. Whether or not that's true, it's still up to the data to facilitate the process. Even if we assume an inherent goal to move back toward lower rates, tomorrow's data could make the road between here and there bumpier than most borrowers care to experience. Bottom line: it's still a roll of the dice and can still go either way.
Loan Originator Perspectives
"Big decision to make today and I may be breaking my own rule, but I think the NFP report tomorrow may show slowing job growth, which is rate friendly. Therefore, I'm floating. If the number is really bad we might be able to break below 4% again. A better number and hold on 4.5% here we come. This report will be a huge indicator of where QE goes from here. The real difficult aspect is that a strong economy and job growth will lead to higher rates and tapering of QE sooner. Bonds won't be in favor. On the flip side a week economy and job growth will continue QE, but will also keep bonds on the table since they are safe heaven. I think tomorrow shows we have a fragile economy with weakening job growth." -Mike Owens, Partner, Horizon Financial Inc.
"Wild ride today in MBS land as prices dropped, soared, then fell back. As of press time we're still well up over yesterday, just wish we could have held our best levels. Tomorrow's NFP report will tell the story, tempting to grab today's improved pricing and get while the getting is good." -Ted Rood, Senior Originator, Wintrust Mortgage
"I haven't commented in the last few weeks during the volatility. My opinion is simple....rates will get better. The recent liquidation pushed out a ton of short term speculators such as REITS, and has created just like anything else a buying opportunity. Valuations for residential and commercial real estate can only be sustained by low rates, and higher rates spell a lot more trouble than just your refinance being a bit higher in price. The domino effect is tremendous as it spills into commercial markets. All rates are higher, resi, comm., swaps, etc....this is a short move in a big picture scenario. We may not see 1.25 on the 10 yr, but you can bet the house that we see 1.60 before 3.00." -Constantine Floropoulos, Quontic Bank
"In this extremely volatile rate environment, I continue my stance of locking dips like today's when they come. Because they don't last." -Julian Hebron, Branch Manager, RPM Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.0% - 4.125%
- 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).