September 9, 2013
Mortgage rates continued lower today, further undoing much of the damage caused by last week's run to the highest levels in over 2 years. Friday's important Employment Situation Report began this process, but as the market's response grew more equivocal in the afternoon, lenders weren't in a safe position to move rates any lower.
Today changed that MBS (the "mortgage-backed-securities" that most directly influence mortgage rates) not only improved, but held those gains very stably into the afternoon. MBS "gains" translate to lower rates. The most efficient combination of upfront cost and monthly payment for Conforming, 30yr Fixed scenarios (best-execution) moved down to 4.625% in some cases, but several lenders remained at 4.75%.
Although today was positive for mortgage rates, it was also a slow day for the bond markets (MBS are part of the bond market) that underlie them. Though the level of activity will probably increase a bit tomorrow, there's a similar lack of calendar data to inspire movement. As such, we're simply seeing some of the defensive attitude from Friday afternoon simply relax nominally today. While this could be the beginning of a broader consolidation ahead of next week's important Fed Announcement, we've just had two great days of improvement and continue to face a highly uncertain rate outlook.
Loan Originator Perspectives
"Great start to the week, somewhat wiping out a larger portion of last weeks losses. Would like to see how this plays out over the next 10 days, and would like to see how the 10 YR reacts to sub 2.90. If you floated into the weekend you got a rally to lock. 15 days should be locked, longer term can play the game but keep in mind the FED and Syria are the major game changers, and the latter not so much. The consensus remains to lock at origination to spare yourself the anxiety created by the volatility. " -Constantine Floropoulos, Quontic Bank
"Another winning day in MBS Land today, as investors pondered last week's tepid employment report and Syrian saber rattling. We MAY have hit a short term rate ceiling, at least until Fed policy becomes more evident at or before their meeting September 18th. We'll gladly take the gains, no one wanted to see rates hit 5%, most of all buyers and their loan officers!" -Ted Rood, Senior Originator, Wintrust Mortgage
"Let's hope the tide is turning a little in favor of lower rates. The jump since early May was fast and furious, so any dip will be gradual. Would be very nice to see some improvement as data has not been very impressive of late. Hopefully markets will realize the numbers are soft and that the economy is not in full growth mode. In my opinion we may get some relief as this reality comes back into focus. Time will tell. " -Mike Owens, Partner, Horizon Financial Inc.
"If you floated over the weekend, you were rewarded this morning with better rate sheets. Not much data in the next few days that can impact rates until Thursday's jobless claims and Friday's Retail Sales and Inflation data so until then we are at the mercy of headline news items and stock movements. Nothing wrong with locking in today's gains, especially if closing in under 15 days but I would favor floating all other loans. " -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).