January 23, 2014
Mortgage rates snapped quickly lower today, matching or beating the best levels seen so far in 2014. Weakness over the past two days threatened to carry rates out of the recently narrow, low range enjoyed since this month's Employment Situation report on the 10th. Today's improvement decisively preserves that range and introduces the possibility that rates could break out of the range on the other side. 4.5% remains the most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution). When adjusted for day to day changes in closing costs, rates fell an equivalent of 0.03% today.
Yesterday, we discussed the possibility that rates were coming to a crossroads ahead of next week's FOMC Announcement. Given the 2 days of weakness, the risk was that we would start down a less friendly path with any further weakness today. Instead, we got the complete opposite. Even though it was an abrupt reversal from the first two days of weakness this week, the near-term outlook is still dominated by next week's FOMC Announcement. It's unlikely that today's pace of improvement can be sustained between now and then.
Loan Originator Perspectives
"Weak data here and in China has helped rates recover all of yesterday's losses and some. Much of the gains have come after lenders issued rate sheets and as is typical they are being extremely slow to pass along improvements. With no major economic data being released tonight(overseas) or tomorrow, I think floating over night is the way to go." -Victor Burek, Open Mortgage
"What a difference a day makes! Rates rallied back to the best levels of the year today. Tomorrow will tell if we can retain the gains. Floating borrowers got an early box of Valentine's Day candy, they should compare today's pricing to see if they want to get while the getting is good, or roll the dice again." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"Head scratching continues. I think traders are just playing with us until next week. In any case locking when you can is the call. Floating is asking for a higher rate or creating a "worry about it" situation that is not warranted. If rates drop then renegotiate down, but thinking you missed an opportunity by locking is not realistic. " -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc. NMLS # 107434
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
- The prospect of the Fed reducing its asset purchases weighed heavy on interest rates for the 2nd half of 2013, causing volatility and generally pervasive upward movement.
- Tapering ultimately happened on December 18th, 2013. Markets had done so much to come to terms with it ahead of time that it essentially just confirmed the the 6 month move higher in rates, but didn't make for another immediate spike higher.
- That said, we should assume that we're still in a rising rate environment on average with scattered pockets of recovery providing clear opportunities to lock.
- The exceptionally weak employment data on January 10th provided on of these "pockets of recovery." There are two ways to approach these. More risk tolerant: set a line in the sand just slightly higher in cost than your current quote. In other words, this could be either the next .125% higher in rate or simply a few hundred dollars more in closing costs. Then commit to lock when your quote crosses above that line in the sand. Less risk tolerant: lock on the day of or day after any significant move lower in rates.
- (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).