July 11, 2013
Mortgage rates were lower today right out of the gate, continuing a move set in motion by comments from Fed Chairman Bernanke late in yesterday's session. Markets didn't have much time to react, but showed early hints at today's strength in overnight trading. Some mid-day volatility forced a few lenders to adjust rates higher, but once it was resolved, even more lenders adjusted rates lower before the end of the day. The net effect is a 30yr fixed best-execution rate that's more convincingly down in the 4.625% range, whereas some lenders were arguably near 4.75% yesterday.
Mortgage rate movement can be measured in two ways. Of course we can examine changes in the actual rate (which we extrapolate on our "mortgage rates" page), but lenders typically offer rates in increments of 0.125% or "an eighth." The balance of day to day (and sometimes hour to hour) movement occurs in "cost." This can refer to the upfront costs associated with buying down a rate or the amount of cash back otherwise received at closing. Today was one of those days where the movement was almost enough to simply say "rates dropped an eighth," but not quite. As such, the reference to 4.75% yesterday versus 4.625% today doesn't mean rates are simply an eighth lower, but it may have made a move down in rate affordable to the point that it's worth the cost. Your lender will generally have the option to show you how adjacent rates will affect your upfront costs.
In considering what lies ahead, it's worth noting that today's rates are the lowest in a week. There haven't been too many occasions where we've been able to say that in the last 2 and a half months that have NOT resulted in higher rates in the following week. Tomorrow is very much up in the air. Markets could choose to key in on economic data or could continue to draw inspiration from Bernanke's comments (and hold out hope that his speeches next week will be similarly helpful. There's the important Retail Sales report on Monday morning as well which may prevent rates from getting too low as market participants look to stay nimble ahead of the data.
Loan Originator Perspectives
"Sunny day in MBS Land as we overcame mid day weakness to rally about 1/2% in pricing as of mid PM. While we're still down from mid June's levels, at least the red ink is off the board for moment and Bernanke press conference and Fed minutes are out of the way. Hopefully we'll see some stability and/or continued gains!" -Ted Rood, Senior Originator, Wintrust Mortgage
"In this current market, there is no shame in locking in the gains when you get them. As we've seen, what's here today, could be gone tomorrow." -Jason York, VP of VA Operations, Prime Mortgage Lending, Inc
"We received some positive information from Ben Bernanke last night, which in my opinion makes tapering less likely in September. It should have also relieved fears of a rate hike anytime in 2014. Both of these should hopefully lead to mortgage rates improving, which leads me to favor floating today." -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.625%
- FHA/VA - 4.25% -4.75% (depending on lender buy-down structure)
- 15 YEAR FIXED - 3.75%
- 5 YEAR ARMS - 3.0-3.375% 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).