February 24, 2014
Mortgage rates moved sideways today, reflecting the ongoing indecision in the bond markets that underlie day-to-day rate movements. The mortgage-backed-securities (MBS) that most directly affect mortgage rate movement spent some time in both positive and negative territory. Rate sheets themselves were slightly stronger and weaker as well, depending on the lender. On average, however, rates were unchanged from Friday's latest levels.
As such, 4.5% remains the most prevalently quoted 30yr fixed rate for the very best borrower scenarios (best-execution). Some lenders may be able to offer 4.375%, but closing costs would be higher in most cases.
The behind-the-scenes world of mortgage rates is currently trudging through an indeterminate period of time where the motivations for substantial moves higher or lower have been muted by uncertainty. In the current case, the uncertainty is brought on by a debate over the weather. Some market participants feel the uncommonly harsh winter justifies some softness in recent economic data while others say that is is overblown. As such, trading levels are 'sitting tight,' until the debate is more adequately resolved.
What's the implication for mortgage rates? Essentially, when trading levels are in a tight range in bond markets, mortgage rates maintain narrow ranges as well. This has generally been the case for several weeks. Unfortunately we won't know when this lack of movement will come to an end until it's actually happening and can only guess at the events likely to get the ball rolling. It could be that we're waiting until the 2nd half of next week for momentum to pick up. Between now and then, both risk and reward are lower than normal when it comes to lock/float decisions.
Loan Originator Perspectives
"If we're going to see a move lower, any time soon, I believe this is the week. There is no particular reason to believe that date will be better than, or even equal to, expectations as the trend has been poor. If you have a little gamble in you, pay close attention over the next few days." -Brent Borcherding, Capital M Lending
"With any data that disappoints, there still is the horrendous winter much of the country suffered through (hopefully) in the rear view mirror. Disappointing data has not boosted safe haven assets. It's tough to tell if and when poor data will become meaningful to the markets. We are still range bound, but my thoughts are if any data beats expectations it will be celebrated, but when if it disappoints, it will be blamed on the weather. Floating is a dangerous game. If you are happy with the terms being quoted I would lock, particularly if you are closing in the next 30 days." -Steve Chizmadia, Mortgage Consultant, American Capital Home Loans
"Still range bound today as markets await motivation to improve or regress. Economists are baffled on recent economic data's relevance due to weather concerns. I don't take stable rates for granted, seen them rise quickly for little reason too many times. Guess borrowers who aren't risk averse could float in hopes of vastly improved rates, but if so, they need to be prepared for the possibility of losing ground as well." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"Being in a range like we've been in for a few weeks makes for less stress from a client point of view. However, lenders have tough calls to make when asked "should we lock" from a consumer. I am of the opinion and have been forever, that there is just too much to lose by floating. Rates spike much faster than they decline. Get caught floating at the wrong time and you're asking for pain. I always suggest locking refinances at application and purchases once a contract is in hand. If rates do drop there will be opportunities to renegotiate down, but if floating you just go along for the ride. This includes the stomach turning climbs in rate. " -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc NMLS # 107434.
"Rates were little changed today as bonds continued their sideways trade. I am floating day by day and waiting for this trend to break while carefully watching the market. Stocks inability to hold on to today's all time intra day highs leaves me hopeful lower rates may be on the horizon. " -Manny Gomes, Branch Manager, Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.5%
- 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.
- 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.
- If anything, there has been some natural rebound against the nice move lower in January. Resistance to that move is low due to the fact that interest rates can't currently rely on weak economic data to help them stay lower (normally it would) because most of the weak economic data is being chalked up to unseasonably cold/snowy weather.
- (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).