July 2, 2013
Mortgage rates leveled off today, with most lenders roughly in line with yesterday's offerings while others were slightly higher in cost. These were some of the tamest day-over-day changes we've seen over the past two months, and any rate that was quoted yesterday should still be available today, albeit with minimal increases in borrowing costs in some cases. This means that the 30yr Fixed best-execution rate remains at 4.375% for only the second day in two weeks.
Yesterday I mentioned that we were settling in to a more central range after having peeled off some of the ill effects of a poor trading environment over the past week and a half. Today's flat-to-slightly-weaker day of rates confirms that. In short, rates topped out, leveled off and now await the next move. That move can be higher (back to recent highs at least) or appreciably lower, and will be informed in two stages. The first stage is the less important of the two, but can still matter. That arrives tomorrow and is primarily concerned with the employment figures from ADP, which are generally seen as a precursor to Friday's much more important Employment Situation Report.
To reiterate: we made it back to a more neutral stance as of yesterday. It may seem like rates are on the mend because indeed, they have been for about a week. Don't let that lull you into a false sense of security regarding prospects for an ongoing recovery. That CAN happen, but it will depend on the two stages of employment data mentioned above.
Loan Originator Perspectives
"There's too much uncertainty with ADP print tomorrow, a mid-week holiday and NFP on Friday with nervous junior traders, filling in for the vacationing pros. Lock em up if under your max lock period and float em down, if need be, should the market improve." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
"I'm locking as a hedge against any bad news come Friday. If rates improve we can either renegotiate lower or relock with another investor. " -Mike Owens, Partner, Horizon Financial Inc
"MBS trending down this PM as traders await tomorrow's ADP payroll report, which will set the tone for Friday's June NFP report. Takes nerves of steel, or a gambler's attitude to float during high risk events like these. A stronger job market means increased Fed tapering expectations; a growing economy equals higher rates." -Ted Rood, Senior Originator, Wintrust Mortgage
"Although the reports may produce possible improvements to rates, I would be extremely weary of floating into a major holiday + major market moving data releases (ADP on Wednesday, ECB on Thursday, NFP on Friday) followed by the weekend. The consensus is to lock at origination to spare yourself of any volatility followed by regret and grief. " -Constantine Floropoulos, Quontic Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.375-4.5%
- FHA/VA - 4.0 OR 4.25%
- 15 YEAR FIXED - 3.5 - 3.625%
- 5 YEAR ARMS - 2.875-3.375% 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).