February 12, 2014
Mortgage rates moved higher at their fastest pace in more than a month today, confirming yesterday's shift in momentum. While this isn't an outright guarantee that rates continue higher, it conclusively ends the trend toward lower rates seen so far in 2014. There was no significant economic data today, leaving markets freer to show their underlying motivations. While the most prevalently quoted conforming 30yr fixed rate for the very best borrower scenarios (best-execution) remains at 4.375%, 4.25% fell out of it's 'distant second' position. 4.5% was happy to pick up that slack. When adjusted for day to day changes in closing costs, rates rose an equivalent of 0.06% today, for a total 2-day move of .10%.
2014's rally toward lower rates has now bounced back quickly enough to warrant some concern. The nature of that rally was to act as a correction to the broader move toward higher rates in the second half of 2013. We had a similar correction from mid-September through October. This one was about the same in terms of scope and longevity.
The past two days of market movement have already ended that correction, but the next move is debatable. Today's weakness hints at how that debate will go, in that it suggests some momentum pointed toward further rate increases. Tomorrow is crucial in confirming or rejecting that momentum. Some reprieve is not out of the question, but that's heavily dependent on the tone of data. Whatever the case, the path of least resistance is higher for now.
Loan Originator Perspectives
"Well, it appears quite evident that we were on the lower end of the range as little as two days ago, which was my stance at the time. I still believe the short term decision should be to lock, as there is more room and momentum to the upside. You can hope for rates to go lower, but short term momentum is against you." -Brent Borcherding, Capital M Lending
"Rough couple days for mortgage rates. Tomorrow, we do finally get some data that has the potential to move the markets with the release of weekly jobless claims and retail sales. If claims and retail sales come in worse, we could see rates improve but many might blame the weak reports on winter weather which will lessen any improvements we might get. So not much to gain with floating tomorrow but a lot to risk. I favor locking if you are within 30 days of closing." -Victor Burek, Open Mortgage
"The fun continues. The glimmer of hope has faded as has the prospect of a stock market correction helping us get to lower rates. February jobs report may help but weeks away so for now we'll watch the best execution rates move higher." -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 - 3.375-3.5%
- 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.
- 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).