March 12, 2014
Mortgage rates moved lower at their best pace of the week today, undoing the damage from last Friday's Employment Situation report, and about a third of the week's total losses. Whereas yesterday's activity in the secondary mortgage market was volatile, today's was less so, drawing strength from a well-subscribed 10yr Treasury auction. Treasuries do not directly affect mortgage rates, but they often set the tone for other low risk fixed-income investments such as mortgage-backed securities (which DO directly affect mortgage rates).
4.5% recently took over as the most prevalently quoted conforming 30yr Fixed rate for the best-qualified borrowers (best-execution). Today's gains begin to chip away at that and bring 4.375% back into view, though we'd need to see a bit more positivity for it to unseat 4.5%. When adjusted for day-to-day changes in closing costs, rates moved lower by an equivalent of 0.03% today.
As far as prospects for that sort of positivity are concerned, we won't have to wait any longer than tomorrow. The morning brings the first substantive dose of economic data this week (Monday through today have been silent) in the form of Retail Sales. This is a relatively important piece of data and along with the other events on tap, could serve to inspire some more genuine movement in rates as opposed to the tentative trends of the past few days. If the data is weaker than expected, rates should improve, but vice versa if it's stronger.
Loan Originator Perspectives
"Rates stabilized on Monday and Tuesday after last weeks large sell off (increase in rates). I was feeling confident there may be a short term float opportunity. That paid off when rates were made available this morning and I would continue that process for the next day after such a great 10 yr auction. Be ready to lock but for the short term, floating is paying dividends." -Brent Borcherding, Capital M Lending
"Floaters were rewarded once again this morning with improved lender pricing. Since we have had no domestic economic data to move the markets, we can thank weakness overseas in China and Europe and the ongoing Ukraine crisis for the improvements. Tomorrow, we get our first domestic economic reports that has the potential to move the markets with the release at 8:30 of initial jobless claims and Retail Sales. This makes floating overnight risky. I would recommend consumers closing in less than 15 days to go ahead and lock in the gains of the week but wait til later in the day as some lenders have already begun repricing for the better." -Victor Burek, Open Mortgage
"Rates were better today and i'm looking for them to get even better. Traders seem fearful of global slowdown and appear to be parking money in safer places. The strong 10 year treasury auction suggests there is an appetite for bonds. If inflation data later this week is tame we can see bonds continue to rally." -Manny Gomes, Branch Manager, Norcom Mortgage
"Solid gains today following some international drama, the collapsed NY buildings, and an "A+" treasury auction. It's important to note that we're still within recent ranges, but at least we're down from last week's elevated rates. At SOME point, I still feel Ukraine/Syria will help us rally, not sure when though. Tomorrow has weekly jobless claims and a 30 year bond auction, hopefully we'll continue today's trend." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage.
Today's Best-Execution Rates
- 30YR FIXED - 4.5%
- FHA/VA - 4.00%
- 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).