February 28, 2014
Mortgage rates rose slightly today ending a strong 3-day move lower. The weakness followed this morning's economic data, but the bond markets that indirectly influence rates were already losing ground during overnight trading. The implication is that the additional weakness brought about by the economic data was marginal, and the overall increase in rates has been livable. In most cases, the only effects will be on the closing costs for the same rates quoted yesterday. For the best-qualified borrowers seeking a conforming 30yr fixed, 4.375% remains today's most-prevalently quoted rate (best-execution).
It's tempting to buy in to market movements that are as seemingly strong as this week's have been. Rates fell 0.14% on average during the first four days of the week and only gave back 0.03% of that by the end. In the bigger picture, however, bond markets are merely buying time, moving back and forth in relatively narrow ranges before making a more committed decision. Once the incoming economic data can rise about being taken with a grain of salt due to "the weather," faster-paced movements will probably resume.
Loan Originator Perspectives
"We got mixed data this morning. GDP and Pending Home Sales came in weaker than expected with weather being the blame, while Manufacturing data out of Chicago and Consumer Sentiment didn't seem to be impacted by weather coming in better than expected. Go figure...Following the data, lenders did worsen rate sheets this morning, but as the day has progressed, MBS have managed to regain much of the losses. If you floated through today, I would keep floating until Monday." -Victor Burek, Open Mortgage
"Getting a little scary and floating is dangerous. Next week is huge and will set the tone for the rest of the year I believe. We'll see what happens but higher rates can't help housing." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc NMLS # 107434.
"Weak morning for MBS today following economic news, but we regained the losses this afternoon. It's not surprising to see markets consolidate at lower levels, and the 10 year Treasury held below 2.7% yield, which is encouraging. Next week's NFP report on Friday is the marquee event of the week, any movement between now and then is only a precursor to it. Good day to talk pricing with your originator to see where you stand, and if not today, need to do so early next week." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"If you are locking in the next week, Lock 'em up now. Next week's NFP is a HUGE data point with major significance on markets. I believe we'll see rates creep upward until then, as investors protect themselves. We've seen a lot of improvement, take your gains and be happy." -Brent Borcherding, Capital M Lending
Today's Best-Execution Rates
- 30YR FIXED - 4.375%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- Rates moved gradually higher into the end of 2013 and reversed course with a nice move lower in January 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.
- The Fed has stayed the course on their $10bln per meeting reduction in bond buying, though 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. That bounce has been as low as rates have gone so far this year. Now we're tentatively waiting for the next move.
- Because of the unseasonably cold/snowy weather across much of the country, market participants are hesitant to stray too far from the narrow range carved out during February (because it clouds the validity of the economic data).
- As soon as investors can have more confidence that the incoming data is an accurate representation of economic conditions, we should see more willingness for rates to react accordingly, with weaker data helping keep rates lower and stronger data pushing them back toward January's highs.
- (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).