February 14, 2014
Mortgage rates moved higher today, erasing yesterday's improvements and carrying them to their highest levels since late January on average. For many lenders, today's rate sheet offerings are very similar to Wednesday's. This is the territory where the recently dominant 4.375% rate begins losing serious ground to 4.5% as the most prevalently quoted 30yr fixed rates for the very best borrower scenarios (best-execution). When adjusted for day to day changes in closing costs, rates rose an equivalent of 0.05% today.
The bond markets that ultimately dictate mortgage rates marched to their beat today. Typically, weaker economic results in bond market strength and thus lower mortgage rates, but the strength that followed today's weak Industrial Production report wasn't enough to offset the preexisting weakness.
As we noted, yesterday's strength was the lesser of two evils but didn't do much to argue for a continued move lower. Some of that may have to do with the 3-day weekend ahead (Presidents' Day on Monday) as lenders tend to be more conservative ahead of extended weekends. It continues to be the case that the previous trend that carried rates lower into early February is over and the current trend has been a fairly steady push higher. Today could have cast doubt on that trend had it gone the other direction, but as it stands, the momentum leading higher won out, keeping risks elevated until further notice.
Loan Originator Perspectives
"Friday before a long weekend and we see weaking, I'm not surprised at all. Don't make any lock/float decision today, wait until Tuesday and start the reevaluation process then." -Brent Borcherding, Capital M Lending
"Weak data and bonds get no love. No logic other than traders wanting stocks to go higher. And that's what they are getting. My broken record is let's see what the Feb. jobs report shows. Another poor report and we may get some sort of reality check in the stock market helping bonds. Unless of course the weather gets blamed yet again. " -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
"Rates sheets where slightly worse today even after the weaker than expected industrial production data was released. While the increase was small it does not bode well heading into a holiday weekend. Higher rates may be ahead unless the stock market runs out of steam. Locking seems prudent." -Manny Gomes, Branch Manager, Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.375%-4.5%
- 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.
- Rates got an ostensible push lower from weakness in stocks and emerging markets. As soon as those moves ran their course, the rate rally bottomed out as well. Now we're tentatively waiting for the next move.
- (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).