January 30, 2014
Mortgage rates inched higher today after hitting the lowest levels of the year yesterday. Trading in the secondary mortgage markets was far calmer by comparison as yesterday's FOMC Announcement served as a focal point for volatility. As the end of the day approaches, trading levels for the mortgage-backed-securities (MBS) that most directly influence rates are fairly close to yesterday's latest levels, but had been weaker this morning. The improvements allowed a few lenders to release positively revised rates sheets as the day progressed, but on average rates are still slightly higher.
That said, the movement wasn't enough to nudge 4.375% out of position as the most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution). For some lenders, that rate remains 4.5%. When adjusted for day to day changes in closing costs, rates rose an equivalent of 0.01% today.
Yesterday, we'd discussed the interplay between mortgage rates and related markets such as equities (stocks) and emerging markets. In short, relatively panicked selling of those related markets has been helping rates move to their lowest levels of the year. Today is on track to be the best bounce back for equities since the panicked selling began and to whatever extent that bounce continues to materialize, it could also continue to prevent rates from falling any further.
Loan Originator Perspectives
"Early morning weakness in the bond markets led to lenders slightly worsening rate sheets from yesterday. New supply of treasuries are out of the way as the last auction for the next couple weeks took place today with pretty good results. If you floated overnight, I would continue to float but as always nothing wrong with locking in the recent gains we have enjoyed over the last few days." -Victor Burek, Open Mortgage
"Pending home sales data released today showed a stunning decline of 8.7%. Rates retained most of yesterday's gains, and for the moment, look fairly stable, but there are no guarantees that will continue." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.375%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 3.375%
- 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.
- Rates moved gradually higher into the end of 2013 and began to move gradually lower into the beginning of 2014, helped along by a weak employment report on January 10th. This report raised doubts as to whether or not the Fed would continue tapering asset purchases at the same pace, but it was ultimately a flare up in emerging markets and weakness in stocks that fueled bond-market positivity and allowed rates to hit 2014 lows on the same afternoon the Fed reduced asset purchases by another $10bln.
- With that in mind, further interest rate resilience in the face of tapering only looks limited by ability of emerging markets and equities to continue being weak.
- (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).