March 17, 2014
Mortgage rates moved moderately higher today, erasing most of the improvement seen since Thursday afternoon. At that time, global markets including the bond markets that most directly affect rates, began preparing for worst-case scenarios following the weekend's referendum in Crimea. The actual repercussions (sanctions) have scarcely been a match for the fears (military action). As such the trading that was motivated by those fears has begun moving back in the other direction--i.e. "higher" for rates. When adjusted for changes in closing cost, rates are 0.04% higher today, bringing the most prevalently quoted conforming 30yr Fixed for the best-qualified borrowers (best-execution) up to 4.5% for some lenders, though at least as many are still offering 4.375%.
There are two important considerations to keep in mind when it comes to Ukraine's effect on mortgage rates. First, based on the drop in rates last week that can be attributed to geopolitical risk, we still have more ground to make up if tensions continue easing. In other words, if Ukraine was the only reason for bond markets to move, rates could continue to rise.
The second consideration is that Ukraine is not the only reason for bond markets to move. That's not nearly as obvious as it might sound given the extent to which almost everything else was tuned out late last week. The challenge here is that it won't be an 'all-or-nothing' contribution. Without any troubling new developments, the benefits for mortgage rates will continue to fade at a moderate pace. That said, if this week's healthy slate of data suggests the economy is continuing to rise above recent slowness (weather-related or otherwise), that pace would likely quicken.
Loan Originator Perspectives
"Rates were up today despite continuing drama in Crimea. Unless the international community escalates their response, or widespread riots break out, it's hard to count on a "risk rally". Economic data and Fed policy hold the key to long term interest rate movements. As we leave winter weather behind, and Fed continues tapering, it's most likely rates will increase, not decrease." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"Much of the gains driven by the Ukraine crisis were taken away today. It appears the market priced in a much worse outcome. I think this issue will continue to pop up over the coming days/weeks keeping rates relatively contained. The economic data picks up tomorrow with inflation and new home sales tomorrow, both can have a large impact on rates. I would recommend locking today if you are within 15 days of closing." -Victor Burek, Open Mortgage
"With no bullets flying in Russia and the Ukraine, our rally has lost it's legs. Higher rates today from Friday and likely higher tomorrow. Locking in what little is left from last weeks gains is a good call in my book." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
"Rate were higher today as fears over tensions in Ukraine decreased. With so much uncertainty the risks of floating are very high. All eyes are on Janet Yellen's conference this week. locking here appears prudent. " -Manny Gomes, Branch Manager, Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.375%-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).