January 6, 2014
Mortgage rates were flat to slightly lower today. Activity continued to ramp up following the holidays in the financial markets most directly connected to lenders' rate sheets, but that process will begin in earnest in the latter half of the week. The increasing levels of activity mean more potential movement in rates, which have been very close to unchanged throughout the holidays. 4.625% remains the most prevalently quoted rate for ideal, conforming 30yr Fixed loans (best-execution).
Among the significant events for mortgage rates later this week, three stand out. Two of those are on Wednesday: ADP Employment and the Minutes from the most recent FOMC meeting. While ADP isn't the biggest employment report of the week, it does serve as an early indication for Friday's official numbers. Because it is released at 8:15am, it can have a noticeable effect on the very first rate sheets of the day. This means that borrowers who wish to avoid the risk that strong employment data will push rates higher should lock on Tuesday or before.
That said, if the employment data doesn't happen to come in stronger than expected, rates could continue gaining some ground. The long term trend still clearly favors higher rates, but even in such trends, there will still be pockets of correction and recovery. These are great opportunities to lock. The conservative approach would be to consider the moderate improvements since Dec 26 as a small pocket of recovery while the aggressive play is to hold out for better gains after the jobs data. As always, this is tantamount to rolling the dice, as strong numbers could just as easily push rates higher before you'd have a chance to lock.
Loan Originator Perspectives
"If you floated over the weekend, you should be seeing better pricing today. Not all lenders have repriced better so if you plan to lock today give your lender time to pass along some of the gains. Lots of potentially high impacting events and reports coming in the next few days which makes floating risky but nothing of importance tomorrow. As the week progresses, floating will get riskier and riskier. It might be worthwhile to float overnight and see what the morning brings." -Victor Burek, Open Mortgage
"Some moderate gains in rates/pricing today as ISM manufacturing data missed expectations. Little economic news tomorrow, but Wednesday is the start of 3 days of employment related data that can greatly influence rates. Can't fault anyone wanting to float today, with an eye on locking tomorrow, but all bets are off after that." -Ted Rood, Senior Originator, Wintrust Mortgage
"Still favor locking if you can at application. Too much risk and too little to gain by floating. Unless sentiment changes dramatically based on the reports out this week, rates will drift to the upside in my opinion." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc. NMLS # 107434
Today's Best-Execution Rates
- 30YR FIXED - 4.625%
- 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.
- NOTE: Lenders had begun adjusting rate sheets to account for the most recent announced hike in Guarantee Fees. This would have unequivocally raised rates by at least an eighth of a percent for almost every borrower, and in most cases .25-.375%. Those changes are now on hold indefinitely. We won't know if they're coming back or not until we hear more official word from new FHFA Director Mel Watt.
- (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).