July 18, 2013
Mortgage rates rose modestly for the first time in 6 business days today. For most lenders, the movement was far from abrupt, and although it won't affect yesterday's quoted interest rates for most borrowers, it may increase the closing costs required to obtain those rates. the closing costs on those quotes. Conventional 30yr fixed best-execution remains at its newly acquired level of 4.5 percent. Lenders continue to be stratified, meaning that pricing varies more than average between lenders and even in cases where two lenders may be in similar territory on one rate, the costs to move between rates can be quite different. For instance, using a $200k loan as an example, one lender might only charge $1100 to move from 4.5% to 4.375% whereas another might be just over $1600.
Despite the fact that today's final round of Bernanke's Congressional Testimony stood a chance to be a significant source of market movement, it was the morning's economic data that actually had the biggest effect. While Bernanke was a 'potential' market mover it became clearer yesterday that the emphasis was on 'potential.' This morning's MBS Commentary, offered the notion that "the Fed would be hard pressed to offer something new" and that markets may not be interested in Fed policy until at least July 31st when the next official Announcement is released. That left today with the chance of seeing interest rates react more to scheduled economic data releases where a well-regarded Philly Fed Survey was much stronger than expected (despite "Fed" in the name, this is not Fed policy, but rather a survey conducted in the Philadelphia FEDeral Reserve district, hence the name).
There is no scheduled economic data tomorrow to cause hope or fear about a big potential market movement. That said, the absence of important data doesn't preclude movement. When market participation is this low, data-free Fridays are slightly more likely to be challenging for MBS, the mortgage-backed-securities that most directly influence mortgage rates. In and of itself, it's not a marked enough trend to sway decision making, but when taken in conjunction with the fact that we just had our first day of higher rates since July 10th, it arguably makes more sense to err on the side of caution heading into the weekend, especially if you were floating a rate any time in the past two weeks and if today's rates meet your needs.
Loan Originator Perspectives
"A positive Philly Fed index number offset Bernanke's benign comments to Senate today and rates rose slightly throughout the afternoon. September tapering is no longer certain, and while that eases some immediate concerns, have to wonder if we've hit a short term floor on rates. Our floating bias of last few days is trending towards locking. Will take some disappointing data to help rate markets now that FedSpeak is done for the moment." -Ted Rood, Senior Originator, Wintrust Mortgage
"Market went backwards after several days of positive movement. Rates are going to bounce between 4.375% and 4.75% for the next several weeks. Since it is a sellers market, I am advising my customers to offer full price, get closing cost credit, and buy your way to the low end of the range. " -Chris Marconi VP Residential Lending First Midwest Bank
"Well a test of lower rates has failed. So lock what you can because holding out for lower rates is going to be a losing effort. Until sorry economic data prints, rates are not moving lower. I don't count on this happening." -Mike Owens, Partner, Horizon Financial Inc.
Today's Best-Execution Rates
- 30YR FIXED - 4.50%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 3.625%
- 5 YEAR ARMS - 3.0-3.25% 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
- 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).