February 18, 2014
Mortgage rates were lower in some cases today, though some lenders merely held steady compared to Friday's latest levels. Mortgage-Backed-Securities, the financial instruments that most directly affect rates, benefited from weaker economic data and general strength in Treasuries. Rates didn't quite return to Thursday's levels, but 4.375% was able to hold it's ground as the most prevalently quoted 30yr fixed rates for the very best borrower scenarios (best-execution). 4.5% was in the process of taking over on Friday. When adjusted for day to day changes in closing costs, rates fell an equivalent of 0.02% today.
Today's improvement is a welcome development, suggesting that some of Friday's weakness may indeed have owed itself to conservative pricing/trading strategies ahead of the 3-day Presidents Day weekend. What had been a fairly linear move toward higher rates so far in February is now leveling-off. This sort of movement often resolves itself with a more pronounced move higher or lower. As we get more economic data in the coming days, including the Minutes from the most recent FOMC Meeting, we should find out more about which direction will win.
Loan Originator Perspectives
"We had a nice mid day rally today that improved pricing for at least 12 lenders. Still no clear short term trend apparent, but any day with gains is a good day. Until market makes a decisive move lower, it's dicey to float unless you have nerves of steel and your budget isn't exceedingly tight." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"We'll take the improvements even if it they seem to appear for no reason. Bad reports so far this month have not generated the type of bond reaction you would typically see. Nothing today to swing the tide from a report standpoint, yet rates are improving. Even stocks are flat so a sell off isn't the culprit. Maybe the trend will continue as we head into the home buying season." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
"I am becoming more optimistic about rates. They have been improving as stocks continue their advance towards their previous all time highs. Should stocks stall their advance and retreat bonds look poised to benefit and lower rates will be the outcome. I am carefully floating and waiting to see if bonds gain momentum. " -Manny Gomes, Branch Manager, Norcom Mortgage
"Continued weak data is helping rates. Much of the gains today came after lenders issued rates so not seeing much improved pricing when compared to Friday. But as of 1pm, some lenders have repriced better. If locking today, hold out til end of day, but I favor floating until tomorrow to see if the data continues to disappoint and allows lenders to pass along more of the gains." -Victor Burek, Open 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).