September 11, 2013
Mortgage rates changed course yet again, this time heading back down after yesterday's rise ended a reasonably strong 2-day move lower. Today's improvement brings most lenders back in line with the rates they were offering on Monday afternoon. The most prevalent quotes for Conforming, 30yr Fixed scenarios are again closer to 4.625% though the most efficient combination of upfront cost and monthly payment (best-execution) is still 4.75% at several lenders.
Yesterday, we noted the gyrations of US Treasuries and their trickle-down effect on the mortgage-backed-securities (MBS) that underlie mortgage rates (Read More: Mortgage Rates Higher, Ending 2-Day Winning Streak). Today was similar except the movement unfolded in the reverse direction. Volatility surrounding the US Treasury auction ultimately led Treasury yields lower and mortgage rates followed to a slightly lesser extent. The net effect is an interest rate landscape that's giving very few clues about its next move, perhaps waiting for the next two days of economic data and the final Treasury auction of the week (if it's going to make any move before next week's important Fed Announcement).
Loan Originator Perspectives
"Feels like we are trapped between a very tight range that will almost certainly move higher without a bit of help from next weeks FOMC. Broken record here, 15 days should be locked, 30+ can float on their own risk. Buy the dips sell the rips. Green MBS days are good days to consider locking, I am of the opinion that we are owed a bit more and their is a solid chance we get that prior to the Fed next week. " -Constantine Floropoulos, Quontic Bank
"An "A+" 10 year treasury auction helped offset AM weakness in MBS market today. We're at resistance on 10 year yields, may need a push to get below 2.91%. The 900 pound gorilla in the room is still next Wednesday's Fed statement, all eyes pointed to that. Cautiously floating new apps today, with the emphasis on cautious, at least for now." -Ted Rood, Senior Originator, Wintrust Mortgage
"Following yesterday's above average 3 year note auction, we had a stellar 10 year auction today that was met with the 2nd highest demand by investors this year. Once the results of the auction was released, mortgage rates rallied. As of early afternoon, only a few lenders have repriced better. Tomorrow brings us jobless claims, inflation data and final auction of the week. With the benchmark 10 year right at the bottom of our current range, I would recommend those closing within 15 days to go ahead and lock as pricing today is better than yesterday but not quite to where it was on Monday." -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.625 - 4.75%
- FHA/VA - 4.25
- 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).