March 5, 2014
Mortgage rates held steady today, on average, though some lenders are still in slightly worse shape. Weakness in the markets that affect mortgage rates carried over from yesterday and was poised to push rates even higher today, but weaker economic data helped balance the outlook, ultimately keeping the average rate sheet right where it was yesterday afternoon. The most prevalently quoted conforming 30yr Fixed rate for the best-qualified borrowers (best-execution) remains at 4.375% depending on the lender and scenario. Some lenders are closer to 4.5% while fewer still may be offering 4.25%. When adjusted for day-to-day changes in closing costs, rates moved higher by an equivalent of 0.00% today, but keep in mind that's an average of multiple lenders. Individual lenders may be just slightly higher or lower.
For a second day, Ukraine-related tensions were cooler as far as markets were concerned. The lower the level of geopolitical drama, the worse the implication is for domestic interest rates (because the turmoil fueled some 'safe-haven' demand for US Bond Markets, which spilled over into mortgage-backed-securities, and higher demand = lower rates, all things being equal).
That absence of drama started the day off poorly for mortgage markets, but domestic economic data turned things around, albeit gradually. Both of today's key economic releases--ADP Employment and the ISM Non-Manufacturing Index--were markedly weaker than expected. Weak economic data tends to promote strength in bond markets, leading to lower interest rates. That said, today's strength wasn't given much room to run as it had to be balanced against the aforementioned weakness due to diminishing Ukraine-related headlines.
It continues to be the case that rates are approaching Friday's important jobs data from more neutral territory, and the risk remains that some weakness in the data could be discounted due to the unseasonably snowy/cold weather. That means if the report manages to beat expectations, rates likely won't think twice about moving higher.
Loan Originator Perspectives
"I really really hope for you and all my clients that rates move lower in the coming weeks, but I'm just not confident that's the case, at date, and we likely won't know more until after NFP on Friday. Until then, we're still looking at some of the best ratees in over a month, and my suggestion is to lock and enjoy the gains you've likely received." -Brent Borcherding, Capital M Lending
"The economic data was rather weak this morning, but rates haven't managed to rally. Rate sheets did open up worse than yesterday and as of 2pm eastern, many lenders have repriced better but I am still not see rates back to end of yesterday level. If you have floated to today, I would float overnight. Floating through Friday's employment report is highly risky. It could pay off with much improved pricing, or it could cause pain with much worse pricing. To me, it appears Friday's numbers will disappoint, but extremely risky to float." -Victor Burek, Open Mortgage
"Looks like we may get one more month of weather blame. Jobs report will be bad on Friday and the same excuse will be used. Bond markets won't get any love and rates will move higher or at best sideways. Lock before Friday if you can. If rates drop prior to closing, you can renegotiate. Float and pay the price." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc NMLS # 107434.
"Sedate session in rate markets today as Ukraine Drama went to the back burner and thoughts turned to Friday's NFP employment report. It's encouraging we stopped the losses at one day, but an unexpectedly high number of Feb jobs created would put us back in defense mode. If you like your rate, and enjoy sleeping at night, lock 'em up. Floating is not for the faint of heart the week of NFP." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"While my gut tells me floating is the right call, I'm not so sure I can go with my gut here. Poor ADP numbers again and no rally. Ongoing conflict in Russia, but markets don’t care. It just feels like data will need to be absolutely abysmal for it to even be considered without using weather or something else as an excuse. Data has not been good for weeks and the bounce from 2.6-2.7 seems to be a pure range trade play. Unfortunately, we are near the top end of the recent range, but with even a small miss on Friday in MBS markets favor, it just feels like we will sell off and lose more ground. Equities can’t get enough of the Kool Aid and if that remains the case MBS and TSY markets will suffer " -Steve Chizmadia, Mortgage Consultant, American Capital Home Loans
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).