July 16, 2013
Mortgage rates held almost perfectly steady today. Any lenders that offered noticeably different rates were generally in slightly lower territory, but this was barely enough to equate to 0.01 percent of movement on average. Trading activity in MBS ("mortgage backed securities" that most directly influence rates) was exceptionally stable for a second day in a row. The stability suggested that markets were moving into position yesterday and holding that ground today in anticipation of tomorrow's important Bernanke Testimony. Conventional 30yr fixed best-execution remained between 4.5 and 4.625% percent.
Like any other big-ticket event, the next two days of Bernanke Testimony have tremendous POTENTIAL energy for rates. They aren't guaranteed to take rates in one direction or the other, but reserve the right to do either (or both!) in a big way. Such is the nature of highly anticipated events. At stake is 'clarity.' Market participants will take anything they can get at the moment, when it comes to gaining clarity on how Fed policy might unfold at the next two meetings. The first of those is at the end of this month, right before the big jobs report. Bernanke's testimony may well set the tone, for better or worse, for the intervening 2 weeks.
Loan Originator Perspectives
"Solid day in rate markets today as MBS opened well and maintained slight gains throughout the day. Nice to see some market stability, secondary desks don't like volatility. We're hoping Chairman Bernanke doesn't implode this rally when he testifies before Congress tomorrow. Any reference to near term tapering will hurt rates, comments concerning benign inflation will help." -Ted Rood, Senior Originator, Wintrust Mortgage
"Rates could be better, but I think there is too much to consider tomorrow before a definitive path is taken. Hopefully BB won't undue the recent gains with more confusion as to when to taper or not. Locking in recent gains is a good idea in my opinion, but only for insurance." -Mike Owens, Partner, Horizon Financial Inc
"Rates have been on an upward trajectory all year despite a few short-term dips like we're having right now. The lesson: lock the dips. This dip could reverse when Fed chairman Bernanke is grilled by lawmakers on Capitol Hill tomorrow and Thursday. He'll probably signal that the pace of QE will continue unchanged for now, but whenever there's extended public Q&A, there's a chance he'll say something that will spook rate markets." -Julian Hebron, Branch Manager, RPM Mortgage
"Pretty quiet day today. MBS have rallied nicely over the last couple days, but as always lenders very slow passing along the gains. Tomorrow, Ben Bernanke, gives testimony to the Senate which has the potential to be a big market mover, especially the question and answer session after the prepared speech. I feel he will be dovish, pretty much like his last speech on Friday which helped MBS to rally. If he is, I suspect MBS will hold steady or move higher. So I favor floating overnight, but be prepared to lock early. Text of speech is out at 8:30am, the speech is at 10:00am, with Q&A to follow." -Victor Burek, Open Mortgage
"Can't be greedy here. The market has offered us an opportunity to lock in some decent rates and spreads following the historic selling in June. Today the market has consolidated, and is awaiting Ben Bernanke's comments tomorrow to determine direction. Odds are slightly in our favor, but the risks are too high. Lock em up, especially if closing within 15-20 days." -Constantine Floropoulos, Quontic Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.50 - 4.625%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 3.625 - 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).