September 12, 2013
Mortgage rates held almost perfectly flat today, after starting the day in stronger territory and losing ground in the afternoon. As such, Conforming, 30yr Fixed scenarios remained most prevalently quoted at 4.625% though the most efficient combination of upfront cost and monthly payment (best-execution) is still 4.75% at several lenders.
In terms of the "positive, then negative" movement in underlying MBS markets (the "mortgage-backed-securities" that most directly affect lenders' rate sheets), it was the Treasury auction cycle, once again that called the shots. With yesterday's auction giving way to positivity (a move lower in rates), markets were in position for more positivity if today's auction went as well as yesterday's.
Though the auction was better than decent, it wasn't good enough to motivate traders to chase Treasury yields any lower. At the risk of offering too simple a conclusion, without the "chase," markets simply retreated right back to Wednesday's latest levels.
The net effect of "no change" today, puts extra emphasis on the batch of economic data tomorrow. Retail Sales is an important piece of economic data tomorrow morning. It always has the power to move markets, as do the other reports to a lesser extent. Taken together (or if Retail Sales itself is strong or weak enough) it could be taken as a preliminary cue for a much more important event in the week ahead: the Fed Meeting where many expect so-called 'tapering' to be announced.
Loan Originator Perspectives
"Fridays can be challenging days for rates. This isn't a given, but if the data on tap is strong (retail sales/PPI/ sentiment), rates could suffer. The best defense against that potential volatility is arming yourself with knowledge about rate movements and working with an LO that's done the same." -Bob Van Gilder, Finance One Mortgage
"Strong morning in MBS markets gave way to PM selling, and several lenders repriced worse. The range was relatively tight, nothing earth shattering, but always better to close higher than lower. All eyes on tomorrow's retail sales and (especially) next week's Fed statement and its tapering implications. Could do worse than locking today, especially if closing within 30 days." -Ted Rood, Senior Originator, Wintrust Mortgage
"Pretty similar pattern today to prior days. Early morning rally gives way to late day weakness. I continue to have the same guidance for clients. If you are within 15 days of closing, get locked today before tomorrows higher impacting data. Longer term closings might want to consider locking today as today's rates are the best of the week. However, recent news articles have indicated back to school shopping has been somewhat disappointing which might indicate a weaker than expected Retail Sales report in the morning. If so, we could see further gains tomorrow but it is a roll of the dice if you decide to float. Never anything wrong with locking in gains. " -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).