March 6, 2014
Mortgage rates moved quickly higher today, in the context of their recent range. That is to say, today's "sharp" movement is nothing compared to those seen in mid 2013, but it did leave rates as high as they've been in exactly two weeks. At current levels, the most prevalently quoted conforming 30yr Fixed rate for the best-qualified borrowers (best-execution) begins to lean more toward 4.5% though 4.375% is still available. When adjusted for day-to-day changes in closing costs, rates moved higher by an equivalent of 0.06% today.
The losses were slightly steeper this morning, but the bond markets that most directly affect mortgage rates managed to bounce back slightly heading into the afternoon. As a result, several lenders revised rate sheets with modest improvements. Overall, markets are less interested in embarking on epic adventures the day before the month's most important piece of economic data: Nonfarm Payrolls.
Part of the Employment Situation Report (which also contains a reading on unemployment, workweek hours, and earnings), Nonfarm Payrolls is the single most important line item of economic data each month. There is some skepticism regarding this iteration due to the ongoing debate over the weather's potential effect on data accuracy. Some analysts feel that unseasonably cold/snowy weather isn't justification for some of the downbeat data we've seen recently, while others are convinced it's more than enough to skew the numbers.
Whatever side of the debate you're on, most agree that we'll need to wait and see how March and April's data comes in before forming any passionate opinions about economic progress (or lack thereof). The risk continues to be that the negative employment data that would normally help interest rates tomorrow, could instead be mostly shrugged off due to the weather whereas stronger economic data stands a better chance to have it's normal effect (which is to push rates higher).
Loan Originator Perspectives
"Calm before the storm? You betcha, but I can't get past what "appears" to be an relenting bias towards higher rates. We've seen very limited benefit in rate when data has resulted in our favor, but when data has gone against us, rates have risen quickly. This is the theme for rates until we see this trend change. Is tomorrow the day?" -Brent Borcherding, Capital M Lending
"Locking is a must leading into tomorrow. If the jobs report is above estimates rates will take off. A miss and old man weather gets the blame so we move sideways to slightly up. Until Spring when weather can't get the blame, any bad data is tossed out." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc NMLS # 107434.
"All eyes on tomorrow's NFP report in markets today. We lost minimal ground from yesterday's close, hardly enough to impact pricing. No EuroDrama today, apparently Ukraine is solved. Another tepid jobs report tomorrow will likely be shrugged off as weather related, a strong report will point rates higher. We're back in "the range is the range until it isn't anymore" mode, question is whether that will still be true tomorrow." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.5%
- 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).