March 4, 2014
Mortgage rates were sharply higher today, as concern over geopolitical tension in Ukraine turned a corner. After a surprisingly strong end to February and strong start to March, mortgage rates suddenly found themselves moving from the best levels in a month to the worst levels in more than a week. This brings the most prevalently quoted conforming 30yr Fixed rate for the best-qualified borrowers (best-execution) easily back up to 4.375% depending on the lender and scenario. Some lenders may be closer to 4.5% while a precious few may still be offering 4.25%. When adjusted for day-to-day changes in closing costs, rates moved higher by an equivalent of 0.09% today.
In terms of overt motivation, today's momentum shift was all about the possibility that situation in Ukraine had moved past its most precarious moments. That's only part of the story though. As we discussed yesterday, whenever this turning point came, it would make for "compelling upward pressure on rates," if for no other reason than it's previous existence provided some measure of artificial downward pressure on rates. So the release of that pressure added to today's move.
Additionally, we're coming up on the most important three days of the month for bond markets (and hence mortgage rates). These are marked by the important employment reports beginning tomorrow morning with ADP's numbers and culminating with Friday's all-important Employment Situation Report. If rates are ready to take cues from this data (as opposed to continue to follow Ukraine headlines), we'll know it when we see the market's reaction to this data.
Loan Originator Perspectives
"Pricing will undoubtedly get worse into Friday's NFP report, and I plan to reevaluate lock float decisions on Monday next week. Until then, I'd Lock 'em Up!" -Brent Borcherding, Capital M Lending
"What Ukraine giveth, Ukraine taketh away even quicker. Rates opened this morning only slightly weaker than yesterday on reports that tensions are easing in Ukraine. As the day has progressed, rates continue to sell and lenders repriced worse as stocks soared to new record highs. Tomorrow we get a peek into the employment situation with the release of ADP. I find ADP to be of not much importance, but the market pays attention to it so we must. If ADP shows solid job growth, rates should continue to get worse. If ADP reports fewer jobs, we could see rates rally but at this point you have more to risk then to gain with floating. " -Victor Burek, Open Mortgage
"And our Russian help has left the building, though we new it would be short lived. Locking to prevent further losses is a good call. With so much data coming out beginning tomorrow, unless ADP can get start a rally, we will probably be looking at higher rates. Hold on because we could be about to take off. " -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc NMLS # 107434.
"What a difference a day makes. Ukrainian unrest gave us a nice rally yesterday, but the gains (and more) vanished today despite no resolution. All eyes are turning to the upcoming jobs data. The last two months' numbers have been abysmal, but were shrugged off as weather related. If the Feb report exceeds expectations, rates will suffer. Have to be defensive here, unless you know of an upcoming Ukrainian assault, or really enjoy gambling for the sake of gambling! " -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"What change a day can bring. Tension in the Ukraine appears to be over today as far as the market is concerned as stocks erased all of yesterdays losses and actually hit new highs. Rates sheets were worse today and will likely be even worse tomorrow. No reason to float unless your betting on the jobs report being lousy this Friday. Risk vs. Reward is to high at this point locking is the only logical thing to do." -Manny Gomes, Branch Manager, Norcom Mortage
Today's Best-Execution Rates
- 30YR FIXED - 4.375%
- 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).