August 6, 2013
Mortgage rates were flat again today, making this the 7th day out of the past 9 with almost no movement. This week, the lack of movement is even more pronounced than last week, where some of the days that ended up flat, were anything but in the morning hours. Today, by comparison, saw almost instances of lenders changing rates from the day's initial rate sheets. The bond markets that guide mortgage rates seem unsure what to do with themselves in the absence of any major employment-related data. Today's normally relevant International Trade data--while stronger than expected--was completely passed over in terms of moving interest rates. Conventional 30yr Fixed best-execution remains at 4.5% with buydowns to 4.25% making sense for some borrowers in some scenarios (paying extra up front cost in exchange for lower monthly cost).
The incidence of important economic data and events that might otherwise motivate market movement, remains low for the rest of the week with tomorrow being the lightest day so far. The somewhat tricky part about the current environment is that the absence of "likely suspects" to cause rate movement (like Employment reports, FOMC communications, etc) means that we can't look forward to specific times of specific days for the chance of volatility. In other words, the flight is smooth so far, but the visibility is low. An unexpected market-mover could have a bigger effect than it otherwise would if markets were looking out for it in advance, but in general there is currently lower risk and reward for locking and floating.
Loan Originator Perspectives
"Another tight trading range day today in MBS Land. We stayed within a narrow range, and few, if any, lenders repriced. Expect more of the same, biggest data this week are treasury auctions tomorrow and Thursday. Good news is that rates shouldn't rise much, bad news is that rates are unlikely to fall significantly either." -Ted Rood, Senior Originator, Wintrust Mortgage
"Mortgage rates remain range bound in a pretty tight range this week. There appears to be no motivation to drive rates lower. At this point, there is not much benefit to floating, especially purchase loans. Tomorrow's 10 year auction and Thursday's employment claims are about the only events that might influence the near term direction of rates." -Victor Burek, Open Mortgage
"Do you know that peaceful, easy feeling? Well, that's not what I have right now. I recommended and executed three locks in the last two days for borrowers. I could be wrong, but I'm feeling very defensive. With all but one client locked up, I feel better about their positive outcomes. If improvements roll our way, I have float down/ renegotiation options to exercise." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
"Sideways for the second day in a row. Range on the 30 year 4.5% to 4.625% with plenty of opportunity to buy down to 4.25%. I advise to float with a cautious eye at least for another day or two." -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).