March 3, 2014
Mortgage rates moved noticeably lower today, as investors sought the relative safety of bond markets in response to geopolitical tensions in Ukraine. The mortgage-backed-securities (MBS) that most directly affect mortgage rates typically benefit when demand is high for safe-haven assets like US Treasuries. Current levels are right in line with those seen on February 5th. The most prevalently quoted conforming 30yr Fixed rate for the best-qualified borrowers (best-execution) is currently in the process of moving from 4.375% to 4.25% with both showing up today depending on the lender and scenario. When adjusted for day-to-day changes in closing costs, rates moved down by an equivalent of 0.05% today.
While there was economic data today that normally elicits a response in bond markets, Ukraine-related headlines set the tone instead. That can continue to be the case, but the bar will move higher in the second half of the week when the economic data gets more meaningful. This is especially true of Friday's Employment Situation Report. Between now and then, it's not a mistake to hold off on locking in the hope that rates could continue to fall as long as you understand why they're falling and how quickly it could change. No one knows when the situation in Ukraine will begin to improve, but once it does, it will make for compelling upward pressure on rates equal to the amount of compelling downward pressure seen last week and today.
Loan Originator Perspectives
"Do you know how quickly the turbulence in Ukraine will be resolved? Me neither, but it is certainly benefiting interest rates at this time. At this point, it looks to be giving enough cover to prevent rates from rising into NFP...so day to day...I'd float." -Brent Borcherding, Capital M Lending
"Rate sheets improved once again thanks to the ongoing troubles in Ukraine. The economic data continues to be mixed. If we get any kind of resolution to the Ukraine crisis, rates will move upward and since that wont come from a scheduled release like economic data would it makes floating rather risky. That aside, on Wednesday we get the ADP employment report which has moved the markets recently and the official jobs numbers on Friday. Better than expected jobs numbers will pressure rates higher. Nothing wrong with locking in the recent gains, but not totally opposed to floating overnight as we get no major reports tomorrow." -Victor Burek, Open Mortgage
"Temporary help from Russia with love. We'll take what ever we can in a week like this one. Hard to see rates being better this morning if not for Russia. If you can lock it's a good idea. Lots of economic data out starting today and getting juicy on Weds with Friday the big jobs report. We're hoping that Fridays report builds on the poor Dec and Jan reports. If it surprises to the upside with any upward revisions to previous months, then hold on because rates are going higher." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc NMLS # 107434.
"Rate markets caught a small dose of flight to safety today as the Ukraine situation reared its head. Can't bank on further gains as we'll have employment data soon to consider as well. Nice pricing today, looked at a pending purchase and they'd gained over 1/8th% in rate since last week. Wouldn't fault borrowers wanting to float carefully over the next day or two, but need to be prepared to lock on a moment's notice as events unfold." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"Those who have been floating were rewarded today as the crisis in Ukraine helped the bond market improve bringing down home loan rates. Floating from here can be dangerous especially heading into the jobs number this Friday. Looking for a little follow through tomorrow but am preparing to lock soon." -Manny Gomes, Branch Manager, Norcom Mortage
Today's Best-Execution Rates
- 30YR FIXED - 4.375%
- FHA/VA - 3.75%
- 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).