August 16, 2013
Mortgage rates rose sharply again today, with best-execution up to 4.75 in most cases, after another round of economic data failed to convince markets that the Fed would reconsider their probable September 18th announcement of a reduction in asset purchases. Much of the interest rate spike of the past 3 months has been in anticipation of so-called "tapering," and the burden of proof is currently on the various scheduled economic reports to suggest the economy is weak enough that the Fed should reconsider. So far, there hasn't been such a report, and in fact, the balance of this week's data was slightly positive.
Even when the data is worse than expected--like today's Consumer Sentiment and Housing Starts--it hasn't been enough. While somewhat audible, these second-tier reports are quickly overcome by the ongoing sturm and drang of lackluster growth. Actually it's the consensus on the Fed's course of action that possesses the sound and the fury. Lukewarm data doesn't speak loud enough to be heard unless it's in the company of many similarly-voiced friends. That was the case today and that's why the markets took an ever more defensive stance against tapering into the weekend.
In other words, both bonds and stocks "sold-off" (moved lower in price), especially into the afternoon hours, because both stocks and bonds view tapering as something that will cause further losses. Next week is light in terms of data with the exception that Wednesday brings the release of Minutes from the last FOMC Meeting. Markets might get some insight to the nuts and bolts of the Fed's tapering plans and are cautious ahead of that event, not to mention generally cautious as the "decision time" for tapering grows closer.
Tto be fair, the "decision" isn't necessarily a singular event where the Fed either announces or not--at least not as far as markets are concerned. They will jump to their conclusions based on the more important pieces of data leading up to the Fed meeting, especially the jobs report on September 6th.
Loan Originator Perspectives
"Ugly Day for markets. Rates began the day higher and only snowballed from there. While we haven't revisited 12 months highs of 7/5 (yet), we're very close. Locking at application is the only way to guarantee you're getting the rate you're looking at today. Unfortunately, that can change several times in the same day." -Ted Rood, Senior Originator, Wintrust Mortgage
"You have to keep your eye on the prize. If you're buying a home, the home is the prize. If you're refinancing, the rate is the prize. Rates took a beating today. Actually a TKO. Keep your eye on the prize." -Bob Van Gilder, Finance One Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.75%
- 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).