July 31, 2013
Mortgage rates are deceptively unchanged here at the end of the trading day, but that was far from the case this morning. Rates were significantly higher earlier today rising from yesterday's levels at their fastest pace of the week after stronger-than-expected economic data. The Fed statement in the afternoon had the opposite and more than equally-sized effect. Many lenders are now in slightly better territory than they were at the end of the day yesterday. Conventional 30yr Fixed best-execution rates remain at 4.5 percent and paying points to move to 4.25% continues to be a viable option depending on the scenario and personal preference
Volatility was in the cards today and we certainly got it. In fact, this was the biggest move lower and higher in the same day that we've seen since June 6th, and one of only several days to exhibit the same sort of reversal this year. In this sense, thinking about rates as "unchanged" is potentially dangerous inasmuch as it suggests today's events didn't deliver on their promise of volatility when in fact, they did, and in spades. If anything, the return to unchanged levels places even more emphasis on Friday's employment numbers, which can still have a major positive or negative impact.
Loan Originator Perspectives
"Great post-Fed rally to help rates today, but I remain skeptical that the MBS rally can hold as the economy and housing improves. Lock these dips." -Julian Hebron, Branch Manager, RPM Mortgage
"Borrowers and originators breathed a momentary sigh of relief this PM as a dovish Fed statement made no mention of imminent Fed purchase tapering. We gained 100 bps from AM lows to press time highs, and lender pricing improvements were frequent and widespread. All eyes now turn to Friday's jobs report, but MBS dodged today's bullet, will hope they're equally successful the rest of the week." -Ted Rood, Senior Originator, Wintrust Mortgage
"Roller coaster day. Weakness this morning led to worse pricing, but a post FOMC rally has led to reprices better. Of course, lenders haven't passed along the gains, taking away much more this morning than they passed along later. I favor floating over night to allow lenders time to pass along the gains. Friday brings us the jobs report. It is a high impact report and could definitely drive rates higher or lower. So lock or float tomorrow based on what you think will happen Friday." -Victor Burek, Open Mortgage
"Quite a ride today with a big jump in rates after the ADP report and GDP numbers and then the big turn around after the FED announcement. Glad I did not lock prior to the 2 pm excitement. Hard to say that Friday's NFP report won't undue all of today's reversal. A big miss would help our momentum, but a big upside surprise would slam on the brakes in a hurry. Pricing is still the best in a while so locking before Friday is not a bad call and probably wise." -Mike Owens, Partner, Horizon Financial Inc.
"I spoke with one of my clients who entered his lock window today. I explained to him that the FOMC minutes would be released at 2pm and that I would watch the market for him. He gave me the go-ahead to preemptively lock if the market worsened. Fortunately, the Fed's guidance was helpful to float another day or at least until late day re-pricings occur, which many did. Strategy over the past few weeks has been very much defensive. That will not change tomorrow in advance of non-Farm payroll and unemployment reports, released on Friday." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
"Today worked out to be a victory for all hoping for lower rates to hang on, even if for one more day. This mornings economic data was enough to send treasuries and MBS into a semi free-fall with fear of this afternoon's FED minutes to further the bloodshed. It was quite refreshing to see that the release was a bit dovish and added a few new words, even if the language didn't change it appeared that the FED maybe watching mortgage rates a bit closer than we thought previously. Nonetheless, Friday is the title holder and reigns supreme, and until then we must remain defensive. When the tide turns we will all know, and for now the outlook is that mortgage rates will continue to rise. Lock'em up!." -Constantine Floropoulos, Quontic Bank
"After a rough start the day ended well with positive repricing. The question is will 4.5% be the top of the range or the bottom after the jobs numbers are released." -Chris Marconi VP Residential Lending First Midwest 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).