August 28, 2013
Mortgage rates bounced higher today, moving back in line with Monday's levels. Conventional 30yr Fixed quotes for the most ideal scenarios (best-execution) are back to 4.625% on average though some lenders are an eighth higher or lower. Frustratingly, this is one of those days where there is no overt "cause and effect" for the movement whereas yesterday's could more readily be chalked up to geopolitical risks surrounding Syria.
Interestingly enough, when Syria seemed to have been a source of market movement yesterday, we characterized it as the easiest mainstream explanation, with the whole story being less simple. It's those "less simple" factors that came into play today. In an effort to be sure they received their adequate treatment yesterday, today's move higher was basically accounted for in advance. Here are the relevant parts of yesterday's comments:
Interest rates appear to be acquiescing to a more determined move in stock prices. Naturally, if the situation in Syria escalates, further declines in rates could be justified, but we also have to consider that rates just hit multi-year highs, and that we're dealing with financial instruments that never simply travel in flat lines.
It's possible that these headlines are being seized upon as a fantastic opportunity to carve out the consolidative range we'd discussed as a possibility last week. A more substantial and sustained move lower would need confirmation from next Friday's jobs report.
Rates seem to be biding their time and demonstrating their knowledge that it's easier to ride waves than to swim against the current. There will be no compunction about heading the other direction when and if the tide shifts.
In short, Syria headlines may have just been an excuse for something rates were going to do anyway. Today's movement speaks to uncertainty, lack of conviction, and unwillingness on the part of financial markets to stray too far from recent ranges ahead of more meaningful economic data. There's a slight chance that the data over the next two days can get this "more meaningful" ball rolling, but certainly next Friday's data has the final say.
Loan Originator Perspectives
"Easy come, easy go. All eyes are on Syria at this point. Unfortunately bad news generally equates to good news (lower rates) in the mortgage world, but there wasn't enough of it today to keep yesterday's move going. Next week's Employment Situation Report will definitely help solidify the trading range as well. Look for that report on September 6th. Stay vigilante, stay healthy." -Bob Van Gilder, Finance One Mortgage
"It's unfortunate that amidst weak economic data and geopolitical uncertainty that the flight to safety was cut down so quickly. The market is still range bound and is not willing to commit to lower rates. Technicals have proven to be the only bit of information we can track to make educated decisions, but even those are temporary. I would like to see how the 10 YR bond reacts to the high 2.7's, and if it breaks through 2.80. If you did not lock yesterday (which you should have) you may as well hold off and hope for high 2.7's to hold as support. Overall we feel rates have a good chance at making a move lower, even if only for a short window. Long term outlook is evident as we are in an increasing rate environment, until further notice you should consider locking at application." -Constantine Floropoulos, Quontic Bank
"I've had the same stance since rates first started rising in January 2013 when the Fed minutes from the previous month showed the first signs of a bias toward slowing QE. That stance is that rates will rise steadily with some miscellaneous dips along the way. This week was a perfect example. We had the best rates in weeks in the two days leading to today, then rates rose sharply. This trend will continue as the Fed starts its exit. It's also worth noting that jumbo loans (above $417k) aren't as volatile day to day because they're not tied to the mortgage bonds the Fed buys. " -Julian Hebron, Branch Manager, RPM Mortgage
"Locking yesterday was a good call, but then I never recommend floating anyway. Giving back some of our gains the last 3 days. Probably won't see much improvement if any before next Friday. With the long weekend, there could be more volatility than usual due to the low volumes. If next week's NFP disappoints, then maybe we pick up where yesterday left off." -Mike Owens, Partner, Horizon Financial Inc
"The upcoming economic data plus the geopolitical scenario unfolding in Syria should be a clarion call for all consumers to talk with their loan officers TODAY. Find out rate lock policy, float down policy and discuss closing time tables. I'm not advising to lock or not to lock, that is not the question. The question is: what are your options? Based on those options, then you can ask the "lock or not to lock" question." -Andy Pada, Jr., VP, 1st 2nd Mortgage
"So much for geopolitical "risk off" attitudes continuing to drive rates downward. We lost ground early today, and the trend continued after a less than stellar 5 year treasury auction. While the damage wasn't epic, it did remind borrowers and originators not to take pricing for granted. All eyes still focused on August's jobs report and its tapering implications." -Ted Rood, Senior Originator, Wintrust Mortgage
"Today was one of those days you have to kind of expect after several positive days in a row. From the trends I usually see, anytime there is a string of positive days in row, then there will will typcially be a pull back day to help correct some of those strong gains. So if we are on our 3rd or 4th positive day, it's a safe bet to lock in those gains, as there is a pretty good shot the following day could involve a selloff. Of course, this doesn't mean that the day after that we won't continue to improve again, but if you have a short timeframe be cautious after that string of positive days!" -Jason York - VP of VA Operations, Prime Mortgage Lending, Inc
"I can't help but be cautious with rate locks right now. What is there to gain? Traders are at the beach or will be with the long weekend, creating sloppy trading. We've had several days of gains tacked together until today. Taper talk is still a mystery. NFP could be great for us, but leading up to it could cause more volatility. If you are happy with your rate, lock and lock now." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
Today's Best-Execution Rates
- 30YR FIXED - 4.625%
- FHA/VA - 4.25% or 4.75%
- 15 YEAR FIXED - 3.75%-3.875%
- 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).