September 20, 2013
Mortgage rates held steady today, keeping them in line with the lowest levels seen since early August, and very close to the lowest levels since mid-June. There were no significant events or headlines to move financial markets and the Mortgage-Backed Securities (MBS) that dictate loan pricing had a relatively calm day.
Conforming, 30yr Fixed rates remain at 4.5% with some of the more aggressive lenders still competitively priced at lower rates (best-execution). This doesn't mean that 4.25% at one lender would be equivalent to 4.5% at another lender in terms of closing costs--simply that the 4.25% scenario may be worth looking into to see if the extra cost makes sense for you.
Wednesday's big news regarding the Fed abstaining from any significant policy changes was the driving force behind the solid improvement. We updated the ongoing considerations yesterday to include "it's too soon to declare the 'rising rate environment' defeated, but September 18th marks our best recent opportunity for an extended hiatus."
With rates holding steady today, that continues to be the case. The door is open for further improvements, but they may be muted by the approach of the big jobs report 2 weeks from today. The risk is the report makes the previous one look like a fluke. If that happens, investors may be right back on the "tapering" bandwagon. If it shows further deterioration in labor markets, we'd likely break the long-term uptrend in rates, if it hasn't happened before then. Keep in mind that this would not guarantee or even suggest a long term reversal toward lower rates, but it would be the most pronounced correction since rates began moving higher in May.
Loan Originator Perspectives
"Some minor gains today as several Fed members offered their takes on Wednesday's statement. Fed speakers often influence price movement as much as data, fortunately today there were no major surprises. Next week holds GDP data and treasury auctions. Looks like we've established a new range, but still can't take market for granted. Floating borrowers may well want to lock these gains in while the getting is good." -Ted Rood, Senior Originator, Wintrust Mortgage
"Mortgage backed securities appear to be going into the weekend in the green after a lower open. Most lenders will be reluctant to pass along the improvements this late on a Friday. As with most Friday's, I don't like locking so I would recommend floating over the weekend. " -Victor Burek, Open Mortgage
"Looks like a fairly sublime Friday today. Always better to lock when you should have floated, then to float when you should have locked. (MND pearl of wisdom). Happy Fall!" -Bob Van Gilder, Finance One Mortgage
"Hopefully we will see further gains and rate improvements next week. Floating until Monday is safe in my opinion. I believe rates have a chance to improve further as more data comes out. The FED confirmed my feelings about the weakness of the economy and the damage higher rates have and will do. Otherwise tapering would have started" -Mike Owens, Partner, Horizon Financial Inc.
Today's Best-Execution Rates
- 30YR FIXED - 4.5%
- FHA/VA - 4.25
- 15 YEAR FIXED - 3.5%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
- Expectations for "tapering" (a reduction in "QE3" asset purchases) mounted over the summer and September 18th was seen as the most likely day for a potential tapering announcement
- But the Fed decided to keep a change in QE amounts on hold until the economy could more convincingly show that rising rates (which had been rising because markets expected the Fed to taper!) wouldn't be too big an impediment to further improvement.
- That brings us to a more uncertain situation than we've been in recently. It's too soon to declare the "rising rate environment" defeated, but September 18th marks our best recent opportunity for an extended hiatus.
- The extent to which that remains true relies on incoming economic data. Strong data will increase the speculation that the next Fed meeting will contain a reduction in purchases
- (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).