July 29, 2013
Mortgage rates were slightly higher to begin a week that could end with much bigger swings. Today, however, was relatively tame with market conditions reflecting a certain calm before the storm of data that begins on Wednesday (includes GDP, ADP Employment data, and a Fed Announcement among other things). That data stands a good chance to impact prices of mortgage-backed-securities (MBS), which most directly influence mortgage rates. The volatility that could be in store is sufficient to cause rapid change to the prevailing best-execution rate of 4.5%, but today's weakness merely means slightly higher closing costs for the same rates quoted on Friday.
As is always the case with big potential volatility, we can't ever know if it will deliver on its full potential to move rates. All we can know is that by the end of the week, the potential is there to see the biggest move higher or lower since July 5th. Today's rates are still closer to the lower end of the range since then. Don't risk losing those if you can't afford another quick .125-.25% increase in rates. The volatility can work in our favor too, but planning on it would be like planning on winning at the Casino, not to mention the fact that the prevailing longer term trend is toward higher rates.
Loan Originator Perspectives
"We continue to trade in a consolidated range bouncing around until further clarity is provided regarding the next step in the FED's tapering. As we have seen over the las few trading sessions the market is in a seesaw environment, and this volatility does not warrant floating loans closing in the near term." -Constantine Floropoulos, Quontic Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.5%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 3.625%-3.75%
- 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).