September 30, 2013
Mortgage rates rose very slightly today for the first time in 3 weeks. The difference in rate sheets compared to Friday's latest was minimal, and some lenders were actually slightly better today. Despite the minimal rise, this technically ends an impressive streak of 13 straight days without moving higher. The average 30yr fixed rate was 4.75% when the streak began and now stands at 4.25% (best-execution) for conforming, 30yr Fixed loans. With the exception of Friday, today's rate sheets are the best since June 19th for most lenders.
Financial markets began the week increasingly enthralled by the 'Government Shutdown' debate, though that's still not much at all compared to mainstream media. Even within financial markets, the 'fixed-income' sector containing the Mortgage-Backed-Securities that most directly affect mortgage rates was much less interested in political developments than the stock market.
Rather than give the impression of being overly concerned by a potential shutdown, rates continue to suggest they're waiting for input from important economic data in order to adjust expectations about Fed policy at the end of the month. The most important event to take in will be the jobs report currently scheduled for Friday, though if a government shutdown isn't averted tonight, that report may be delayed indefinitely (because it's published by the Bureau of Labor Statistics--a government office).
Loan Originator Perspectives
"Rates seem to have found a comfortable range while we await jobs data at the end of the week. Of course, the potential government shut down could also impact rates, but most likely our wonderful politicians will work out some kind of resolution before much damage is done. I continue to advise clients to lock if within 15 days of closing. Longer term locks should also consider locking as that would completely rule out being caught on the wrong side if we get some positive news, but I think floating overnight does not carry much risk but not sure if there would be much to gain. It will take a weak jobs report on Friday for us to see rates move in a sizable way." -Victor Burek, Open Mortgage
"Rates remain close to Friday's. All eyes are on our govt right now, wondering if an actual shutdown will occur. Lock it if you like it." -Bob Van Gilder, Finance One Mortgage
"Political uncertainty can boost MBS demand, and market gained slightly as DC drama unfolded today. Ironic that fiscal dysfunction can help rates, but we'll take it. With rates nearing three month lows, it's tempting to lock in price gains, but floating remains a viable option, IF borrowers are working with an accessible, MBS informed loan officer." -Ted Rood, Senior Originator, Wintrust Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.25%
- FHA/VA - 4.0-4.25%
- 15 YEAR FIXED - 3.375-3.5%
- 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).