March 18, 2014
Mortgage rates were effectively unchanged today, putting an end to 2 days spent moving higher as the threat of violence diminished in Ukraine. Indeed it was violence in Ukraine (or rather, a Ukrainian Military Installation in Crimea) that enabled bond markets to improve today, thus preventing rates from rising further. Some lenders increased costs just slightly while an equal amount went the other direction. In both cases, today's latest rate sheets aren't that far off from yesterday's, though that wouldn't have been the case with this morning's rate sheets as many lenders improved mid-day to reach the 'unchanged' levels. The most prevalently quoted conforming 30yr Fixed for the best-qualified borrowers (best-execution) remains at 4.5% for some lenders, though at least as many are still offering 4.375%.
The balancing act between Ukraine and more normal sources of market movement continues to cause volatility for markets in general. The effects on mortgage rates have been better-enabled by the relative absence of significant domestic economic data. Complicating matters further, the only time that geopolitical risk wasn't having an obvious effect on rates, just happened to coincide with the only recent significant data earlier this month with the Employment report on March 7th.
That employment data made for a convincing head-fake toward higher rates and renewed geopolitical risk brought rates back down in the following week. The point is that significant domestic data hasn't really had to compete with geopolitical risk for the same stage. They've been taking turns, as it were.
The first good chance for this to change arrives tomorrow. There's no way to be sure it WILL change, but tomorrow's Fed policy announcement always has the potential to move markets, and it comes one day after news of gunfire and wounded Ukrainian military at an army base in Crimea. It's hard to imagine Ukraine-related headlines will simply take the day off tomorrow. The Fed certainly won't.
Loan Originator Perspectives
"In today's edition of "How the Putin Turns", rates fell back towards last week's levels amid more Euro political posturing. MBS Live reported 13 lender reprices for the better as of 3:45 eastern time. We still haven't broken any major new ground on either mortgage or treasury bonds. Until we do, any ground we gain may be just as quickly lost the following day." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"Just when it seems things are settling down in Ukraine, we get headlines of gunfire. The issues there are definitely helping to keep rates in the recent range. Rates opened this morning slightly worse, but as the day progressed and headlines hit they have started to improve. As of mid day, some lenders have repriced for the better. Tomorrow, we get news from the FOMC meeting which could definitely move the markets but that will not hit til 2pm. I favor floating over night but be ready to lock tomorrow if the FOMC statement impacts rates negatively." -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." -Brent Borcherding, Capital M Lending
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).