July 23, 2013
Mortgage rates bounced slightly higher today, bringing them almost perfectly back in line with Friday's levels. Trading conditions in the underlying 'mortgage-backed-securities' and US Treasuries markets were underwhelming at best. Just as there hasn't been much by way of conviction as rates have been falling, today's bounce higher was similarly incidental. The day to day movements in rate continue to be much smaller than recent averages (or perhaps it's better to say they've been more "normal" whereas recent averages have been extreme from May through early July). Whatever the case, prevailing rate quotes remain in the same situation as yesterday where the average may be 4.375, but the adjacent rates of 4.5 and 4.25 will make more sense in terms of best-execution.
So far, this week has adhered to the notion that markets will be far more interested in next week's events. Today was one of the two more likely days to be slow and uneventful. Although tomorrow offers slightly more in terms of market moving potential, we could be waiting until Thursday or Friday to see what the ultimate impact will be. As I noted last week, the recent run of good luck for rates looked more like a 'leveling off' process than the creation of new momentum toward lower levels. That makes yesterday's lows like the floor marking the bottom of that process. If we remain above it tomorrow, it's that much more likely to remain solid until next week's heavier events have a chance to break it. To be perfectly clear though, those heavy events can also reinforce the floor (there's nothing to know about them ahead of time beyond the fact that they have lots of potential energy).
Loan Originator Perspectives
"The market is range bound and can break in either direction. It appears we are in a tight trading range (both treasuries & MBS) currently and this can be a good scenario to be in if the market remains stagnant. The consensus is that rates will keep testing higher levels rather than lower, therefore floating in this environment can be extremely unrewarding. If closing within 21 days you should not gamble with the possibility of a fractional improvement to your rate. Longer term scenario's may be considered with a slightly more aggressive approach, however the risk still may not warrant floating. " -Constantine Floropoulos, Quontic Bank
"Not much has changed in the last 24 hours. Still in the 4.375% to 4.625% range but can turn negative quickly. I am advising clients to lock in and buy down as much as you can." -Chris Marconi VP Residential Lending First Midwest Bank
"Slow day and weaker for bond markets. We dropped the better part of quarter point in pricing, and as a result several lenders repriced their rates. The silver lining is that the move left us still comfortably with the recent range and was relatively narrow in scope. Short term outlook is (we hope) more of the same, with late June and early July's volatility in the rear view mirror!" - Ted Rood, Senior Originator, Wintrust Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.375-4.5%
- 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).