March 20, 2014
Mortgage rates moved higher for a second straight day, extending yesterday's much larger spike. Some lenders remained relatively close to yesterday's latest offerings while others were in noticeably worse shape. Market volatility tends to create variation in pricing strategies between lenders, and while volatility was limited today, its effects are still being managed.
Every Thursday, Freddie Mac releases its weekly mortgage rate survey--the most widely circulated official reading on mortgage rates. While Freddie's survey is extremely accurate over time, it's also extremely outdated in the short term. This has to do with the Monday-Wednesday time frame that responses are accepted. If rates happen to rise quickly on Wednesday afternoon or Thursday morning, the Survey can be rendered utterly useless to prospective borrowers as it now refers to rates that are no longer available.
This is unfortunately the case today as rates did, of course, rise exceptionally quickly yesterday, and less so today. While the Freddie Survey shows rates moving lower week-over-week, they've actually haven't improved any day this week! Based on the average rate over the past 4 days, this week's rates are only 0.03-0.04 higher than last week's average, but a whopping 0.17% higher from Friday.
The most prevalently quoted conforming 30yr rate for top-tier scenarios (best-execution) moved up to 4.5% yesterday and while there is still slightly more activity there, we're already dangerously close to 4.625% today. When adjusted for day to day changes in closing costs, rates are 0.03% higher on average today, and 0.13% higher over the past 2 days.
Loan Originator Perspectives
"Sedate day today after yesterday's sell off. MBS were virtually unchanged all day, but lender pricing worsened for those who didn't pass along Wednesday's full losses. It's encouraging that we've stabilized, but unlike Ukrainian drama, Fed sentiment affects rates on more than a day to day basis. We'll see where the next move takes us, never boring in the wonderful world of mortgages!" -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"Today might be described as the day after the FOMC and Yellen storm... it's all about cleaning-up, re-assessing the landscape and determining where to go from here. I think we have a week or so of a window, excluding today and tomorrow during which we will have advantageous lock opportunities. This all comes prior to March 31st week, which will usher in ADP and NFP, which I'd avoid locking given better weather in March than either January or February and thus, the greater liklihood of hitting or exceeding employment expectations. Be ready to lock on dips." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
"Was hoping we would see a rebound rally today after yesterdays sell off...but no such luck. It does seem that we have found some support at the current levels. We have no economic data tomorrow, so the markets will pay more attention to headlines. If you floated overnight, I would continue to do so." -Victor Burek, Open Mortgage
"As expected rates sheets were worse this morning or at least more or less the same as they were after the mid-day reprice yesterday. Equity markets were able to recoup some losses while mortgage bonds did not. I would like to see if bonds can stage some sort of rally now that the dust has settled. I am floating into tomorrow but am not drifting to far away from the lock trigger. " -Manny Gomes, Branch Manager, Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.5%-4.625
- FHA/VA - 4.00%-4.25%
- 15 YEAR FIXED - 3.625%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- The Fed has stayed the course on their $10bln per meeting reduction in bond buying, though markets have handled it relatively calmly compared to the days of "coming to terms with tapering" in 2013.
- Rates fell significantly in January, leveled-off in February and have been taking choppy steps higher in March
- Some mitigating factors had kept rates from moving too far out of a narrow range, including the uncertain impact of weather on recent economic data as well as geopolitical risk surrounding Ukraine
- 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.
- That confidence is increasing in March with a strong jobs report and more aggressive forecasts on rate hikes from the Fed. Ukraine has offset that somewhat, but the general trend continues to be toward higher rates.
- (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).