April 14, 2014
Mortgage rates finally ended a move lower than began 7 business days earlier on April 3rd. The biggest movement during that time was the Employment Situation data on April 4th. While those jobs numbers were actually decent and while rates tend to benefit the most from more downbeat data, markets were positioned for surprise improvement. When they didn't get it, some of that defensiveness abated, and rates went back to their lowest levels in a month.
Stock market losses and other movement away from risk in global financial markets helped drive demand for US Treasuries and MBS (The "Mortgage-Backed-Securities" that most directly affect mortgage rates). Greater demand for MBS translates to lower rates. It won't always be the case that stock prices and interest rates move in the same direction, but they have been recently. The current week begins with stocks finding their footing after several rough days. If they maintain that resilience, interest rates could remain under pressure to give up more of their recent gains.
Today's losses weren't severe, which may present a good opportunity to lock if you're in a position to do so. While the rest of the week's rate changes can't be known ahead of time, we can at least observe that today's rates are still quite close to the lower end of their 2014 range. When adjusted for the drop in closing costs, rates rose by 0.03 today on average. The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) is now centered on 4.375%.
Loan Originator Perspectives
"Equity markets are higher today and while this may just be a head fake we do need exercise caution. Lock up the pipeline and renegotiate at a later date if pricing does continue to improve. If tomorrows inflation data is tame you start floating new transactions from that point. " -Manny Gomes, Branch Manager, Norcom Mortgage
"We received more bad news for mortgage rates today when Retail Sales came in much stronger than expected. If not for the Ukraine crisis drawing some attention, I would suspect rates would be considerably worse today. If you didn't lock Friday, pricing is only slightly worse today and I would recommend locking in if within 30 days of closing." -Victor Burek, Open Mortgage
"LOCK, the odds are in favor of that being the best decision. We've bumped against 5 month lows, and to break lower we need some truly negative data to be released to move lower. LOCK is the most prudent move." -Brent Borcherding, www.brentborcherding.com
"I was hoping rates could break out of the recurring range between 4.25 and 4.5%, but just as we make it to the best levels in more than a month, we find ourselves bouncing higher yet again. Fortunately, today's pricing is still fairly close to Friday's, so locking is still a good bet if you are closing within 30 days." -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
- 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 took 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.
- Barring surprises, even within the very narrow trend from January through March, we've seen a slight bias toward higher rates. It will take economic or geopolitical surprises to push back against that momentum.
- (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).