July 8, 2013
Mortgage rates recovered roughly one third of the ground lost on Friday, though this varies from lender to lender. For the sake of perspective, today's improvement was one of the 3 biggest moves of the year, but even if it was factored in last week, Friday simply be one of the 5 worst days for rates in the past 10 years instead of the worst. 30yr Fixed best-execution eased back to a range of 4.625 - 4.75--roughly a quarter of a point higher than last Tuesday and Wednesday.
(Read More About Friday's Losses: Among The Worst Days in Mortgage Rate History)
It's important to note that financial markets were not exactly back in the swing of things in terms of summer-time participation. It's easy to assume that markets are the sort of thing that are either "on" or "off," but people actually make a difference. During this time of year (and especially when there are holiday market closures or days with limited data), some of those people do what other people do and take time off. This has an effect on how markets function-- increasing volatility or distorting reality. These side effects are far from guaranteed, but market participants aren't yet sure what to make of today's bounce back in interest rates because markets simply weren't active enough to draw any conclusions.
It could be the case that we recover even more ground before Wednesday's main event: the Minutes from June's FOMC Meeting. It could also be the case that we're merely catching our breath before more wild rides higher. The point is that we can't know yet. Every time we experience a jarring move higher in rates, there's hope that it will be the last one for a while, but it continues to be the case that we have yet to see a definitive turn since early May. That said, if you'd told traders in the secondary mortgage market that we would embark on a massive sell-off the day before it began, and asked them where 30yr rates would likely find their best supportive ceilings, the two most common answers would likely have been 4.375% and 4.875%.
There is hope for some consolidation in this rate range, but it pays to keep the potential volatility in mind. Not even three months ago, you could think of changes in rates happening not to rates themselves, but simply to the costs associated with those rates. The day to day risks were minimal compared to today where the actual rate itself may be moving an eighth to a quarter of a percent at a time. The scope of possible movement higher or lower has widened.
Loan Originator Perspectives
"Today we were able to recover almost half of the losses in MBS from Friday's runaway selloff. But you couldn't tell from today's rate sheets. Mortgage rates will be slow to improve until some sense of stability is back in the market. I continue to advise all of my clients to lock their rate in to secure their terms. " -Kenneth Crute Branch Manager Prime Mortgage Lending Inc
"Took a new application today, and we'd lost over .25% in rate from last Wednesday, even with a moderate MBS improvement this AM. Today's gains are less than 1/2 of the ground we lost during Friday's historic selloff, but something is better than nothing. Hopefully we'd seen the worst of this debacle, but I wouldn't bet the farm on it." -Ted Rood, Senior Originator, Wintrust Mortgage
"For my customers that are out shopping for new homes, the only thing you can do is keep them posted of the volatility in the market, and let them know that rates could change at any time. Today has been a good day for rates, but as we've seen, we could see another sell off tomorrow! So if you have a customer that is out shopping at their max approval amount, I would be very careful with what they are looking at, and let them know they may qualify for that house on Monday, but not qualify on Tuesday! Communication will now be more important than ever." -Jason York, VP of VA Operations, Prime Mortgage Lending, Inc
"Locking last week before the Friday jobs report was a good call. I'm still locking as there appears to be no end to the rise in rates." -Mike Owens, Partner, Horizon Financial Inc.
Today's Best-Execution Rates
- 30YR FIXED - 4.75-4.875%
- FHA/VA - 4.25% -4.75% (depending on lender buy-down structure)
- 15 YEAR FIXED - 3.875%
- 5 YEAR ARMS - 3.0-3.5% 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).