March 24, 2014
Mortgage rates moved sideways to slightly lower today, but only after a slew of mid-day reprices from lenders. Before that, the morning rate sheets were in slightly weaker territory (higher than Friday's latest) on average. When adjusted for day-to-day changes in closing costs, rates fell by 0.02% on average. That keeps the most prevalently quoted conforming 30yr rate for top-tier scenarios (best-execution) at 4.5%, whereas it had threatened a move to 4.625% on Thursday.
Slumping equities markets and some circulation of geopolitical risk headlines helped bond markets move back into positive territory today. What's 'positive' for bond markets is generally good for rates, though it depends on the extent to which MBS (the mortgage-backed securities which most directly affect mortgage rates) are participating.
That's an important distinction at the moment. While MBS generally move in the same direction as US Treasuries, there has been more volatility in that relationship of late--largely thanks to last week's FOMC news which showed Fed members expecting the first hike in their key policy rate to come slightly sooner than previously expected and to result in a slightly higher rate by the end of 2015. Of course that's a long way off, but financial markets adjust pricing of relevant securities in the present based on those changing expectations for the future.
Loan Originator Perspectives
"My opinion, last week, was that the selloff likely took us to the high end of the range and floating could pay dividends, but you should do so with caution. Today, we are showing support at these levels and I'm feeling more confident in that stance. Floating has the potential to save you money, but always be ready to lock." -Brent Borcherding, Capital M Lending
"Following comments from President Obama pressing for Russia to be suspended from the G8, rates managed to overcome early morning losses. By midafternoon, most lenders have repriced for the better bringing pricing to the best we have seen since Yellen's press conference. The economic data picks up tomorrow with the release of Consumer Confidence and New Home sales, both considered potentially high impacting reports. With today's improved pricing, I think it would be wise to lock up any loan closing within 15 days. " -Victor Burek, Open Mortgage
"Pricing was a bit better today as equity markets sold off. Tomorrow bring a slew of housing data which may move the markets. Living in the Northeast and experiencing how bad this winter has been I don't expect the reports to beat expectations. With 4.5% acting like a strong ceiling on rates at the moment, floating does not appear to be very dangerous and at minimum is allowing us to buy time and hopefully capture a shorter lock period." -Manny Gomes, Branch Manager, Norcom Mortgage
"Ukraine Drama came back into play today, and rates improved despite opening higher. We're still within the recent range, but trending back towards the lower end of that range. As of 1:30 Central, MBS Live reported 19 lender reprices better. It's vital to remember that geopolitical concerns can wax and wane quickly. Great day to check your pricing if you're floating. Starting a loan today? Make sure to consider your risk tolerance, we could lose ground as quickly as we gained it if tensions lessen." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.5%
- FHA/VA - 4.00%
- 15 YEAR FIXED - 3.5%
- 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).