September 24, 2013
Mortgage rates were lower yet again, making for an astonishing 10th consecutive day without rates moving higher. In the 13 days of rate sheets since the September 6th jobs report, rates have only risen once. After only being able to claim 6-week lows yesterday, today's rate sheets are the best in at least 2 months (very close to 3 months). Conforming, 30yr Fixed rates are now down to 4.375% for most efficient combination of closing costs and rate (best-execution) though several lenders have attractive buydowns to 4.25%.
With each passing day, we have more and more confirmation that the FOMC announcement and most recent Employment Situation Report marked and confirmed at least a short term turning point for interest rates. This is the consolidation/correction that we'd been hoping for, and we're now a day or two into it.
The future path of rates is fairly uncomplicated at the moment. Markets are comfortable treating early September rates as near term highs as long as the economic data doesn't surprise to the upside. That means that the fate of rates is tied to the economic reports that come out most mornings. Stronger data will gradually persuade investors that the Fed will reduce the pace of bond buying sooner than later.
On some small scale, that was a risk this morning, but Consumer Confidence came in slightly weaker than forecast, and rates continued to improve. We'll face similar risks with tomorrow's data, but it will either take a concerted effort from several reports or a strong Employment Situation report on Oct 4 to completely dash the dreams of this low-rate rebellion. Between now and then we'll likely see some ups and downs, as opposed to the exclusively flat-to-sideways bias we've had since Sep 6th.
Loan Originator Perspectives
"Another quiet and productive day for rates today. We continued to improve slightly, and while rates are still in the 4's, we're a lot closer to the 3's than the 5's, and that couldn't be said two weeks ago. As we said yesterday, borrowers who have MBS savvy loan officers may want to consider cautiously floating, at least as long as the gains continue!" -Ted Rood, Senior Originator, Wintrust Mortgage
"Another bullish move in both benchmark treasuries and MBS leave us originators smiling at the prospects for even better rates. There has been further technical confirmation as we have entered the mid 2.6 range and shall continue to wait and see where the firm resistance will come in as the data continues to hit the tape. The trend is your friend. Nothing gained going against the grain here. I believe floating is the best option." -Constantine Floropoulos, Quontic Bank
"Optimistic is a good word for where rates may be headed, which hopefully is down. I think jobs numbers coming out next week will be rate friendly as will other economic reports. We shall see. " -Mike Owens, Partner, Horizon Financial Inc.
Today's Best-Execution Rates
- 30YR FIXED - 4.375%
- FHA/VA - 4.25, Some Lenders are Lower
- 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's resulted in the first meaningful "pause" in the "rising rate environment" since it began in earnest in May, 2013. This won't necessarily be an ongoing move in the other direction, and we're nowhere near May's rates yet, but it's a good opportunity to get back in the market if rising rates pushed you out sometime between now and then.
- 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).