August 15, 2013
Mortgage rates rose sharply today, after the large batch of economic data did nothing to suggest the Fed will move any slower to reduce their asset purchases. The risk for this sort of volatility has grown throughout the week as market participants tune back in to economic reports after last week's lull. Yesterday's commentary discussed it and today's potential volatility in greater detail. At this point, trading activity implies that the burden of proof is on economically negative news to push the Fed's likely September 18th tapering announcement back. If the negative news doesn't arrive, rates continue their broad trend sideways to slightly higher. Today's best-execution rate rose from 4.5% to 4.625%.
The week so far has had two kinds of days: those with not much going on where markets drift sideways and those with more meaningful data and sharper movement. Tomorrow is similar to today in that it too contains several pieces of economic data that could impact rates. Keep in mind that the impacts will be felt on rate sheets before you'd have time to react.
Loan Originator Perspectives
"We noted yesterday that volatility could return today, and it did with a vengeance. Bottom line, bad data (Philly Fed index) seems to matter little to bond markets, while good economic data (strong weekly jobless claims) causes a knee jerk reaction to higher rates. Another good reminder to lock early in the process." -Ted Rood, Senior Originator, Wintrust Mortgage
"Rates really took a beating this morning. Since rate sheets were released, MBS have shown solid improvement but reprices for the better have not appeared as of yet. At this point, I would continue floating overnight and see how rate sheets look in the morning. If you cannot tolerate the risk and want to lock today, hold off til as late as possible to allow some time for lenders to pass along some of the gains we have enjoyed since this morning." -Victor Burek, Open Mortgage
"It's another ugly day for rates and just one more reason my clients are glad they are already locked in. Sure there are slight improvements here and there, but the general trend in rates is up and we continue to believe that locking at application is the way to go." -Alan Craft Branch Manager Prime Mortgage Lending
"Locking at application or as soon as under contract is the way to go. Floating is not even a wise consideration in my book. Nothing to gain but pain." -Mike Owens, Partner, Horizon Financial Inc.
"Best to lock if rate offered is attractive. Rising rate environment until it isn't. Safe vs sorry." -Bob Van Gilder, Finance One Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.625%
- FHA/VA - 4.25% or 4.75%
- 15 YEAR FIXED - 3.75%
- 5 YEAR ARMS - 3.0-3.50% 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).