February 11, 2014
Mortgage rates were higher today following new Fed Chair Yellen's first scheduled testimony before the House Financial Services Committee. Most of the damage was done early in the day, which prevented many lenders from revising rate sheets in the middle of the day, though several did. The losses were moderate, mostly affecting the closing costs associated with prevailing rates as opposed to the rates themselves. The most prevalently quoted conforming 30yr fixed rate for the very best borrower scenarios (best-execution) remains at 4.375% with 4.25% and 4.5% both still fairly close. When adjusted for day to day changes in closing costs, rates rose an equivalent of 0.04% today.
As expected, there were no big surprises--or any surprises at all really--in Yellen's testimony, but that was precisely the problem for bond markets (and hence mortgage rates, which are directly affected by bond market activity). It now seems likely that markets in general, were waiting to see if Yellen would pay much mind to the recently weaker employment data. When she didn't, bond markets lost ground and mortgage rates moved higher ("lost ground" refers to weakness/lower prices, which in turn, push rates up).
This keeps the current trend in fairly tenuous shape, and it now looks like rates may be embarking on another move higher after the impressive trend toward lower rates so far in 2014. Last Friday's jobs report was the first event that stood a chance to comment on this potential shifting of the trends, but when that left things in ambiguous shape, it fell to Yellen's testimony to break the tie. It's worth noting that Yellen didn't say anything to make rates go higher today. It was merely the overly optimistic expectations of markets--hoping for something they never got.
Loan Originator Perspectives
"New Fed Chair Yellen testified to the House of Representatives' Finance Committee today, and while she pledged to continue prior Fed policies, rates increased. We're back to a "just saw the bottom for rates" view until further notice. Pricing worsened roughly .4% for most loans, a fairly substantial move for one day. Talked to a couple of LO's who were caught in tight spots due to floating loans, glad that's not the case for my clients!" -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"More of the same as we slowly give back gains that pushed rates to 3-4 month lows. Thanks to Yellen the selloff continues. Again unless we see some kind of major economic report that is negative in a big way, rates will continue to leak higher. That is until the market makers decide otherwise. Maybe a 3rd bad jobs report will turn the tide. Lock when you can to avoid the worry." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
Today's Best-Execution Rates
- 30YR FIXED - 4.375%
- FHA/VA - 4.0%
- 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).