April 28, 2014
Mortgage rates held almost perfectly steady today, with a handful of lenders offering slightly lower costs while others were slightly higher. Once again, weakness in global equities markets provided a benefit for the bond markets that drive mortgage rates, helping to reverse moderate weakness from earlier in the morning. Without the mid-day stock sell-off, rates would have been slightly higher on the day, but as it stands, several lenders released positively revised rate sheets in the afternoon, bringing the average back in line with Friday's. The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains at 4.375% in most cases.
The current week is a different animal compared to last week. After today, the pace and importance of economic events will continue building until coming to a head with Friday's Employment Situation Report. These events have lots of potential when it comes to pushing rates out of their cozy, narrow range of the last three months. Combine that with the fact that three months is a historically long time to spend in such a narrow range and it makes sense to be increasingly prepared for the range to be broken.
Even if that doesn't ultimately happen this week, the important thing to understand today is that the POTENTIAL for it to happen is greater than at any other time since the range began. Adding to the gravity is the fact that markets clearly reacted this morning to an economic report that hardly ever elicits a response--Pending Home Sales. The implication is that the rest of the week's data will have no problem motivating bigger movement if the reports happen to form some consensus on economic conditions being decidedly stronger or weaker than expected. While disappointing data can always help rates improve, strong data will almost certainly do the opposite, and perhaps to a greater degree than it recently has. Bottom line: volatility is a much bigger risk in the coming days.
Loan Originator Perspectives
"The big news this week will be released on Friday when we get the official jobs report. For the past 3 months, the best pricing on NFP week was on Monday with pricing weakening each day until the release of the report. I would definitely lock today if you are within 30 days of closing. The only loans I would consider floating today would be loans that can lock tomorrow on a shorter lock period. " -Victor Burek, Open Mortgage
"LOCK--With Non-Farm's Payroll on Friday, recent history has shown that rates have slowly moved higher each day the week of NFP. We don't have a crystal ball, so that recent history is our best predictor of what to expect this week. If you plan on locking in the next 4 business days, today is like the best day to do so." -Brent Borcherding, www.brentborcherding.com.
"Still a "high risk" week for mortgage rates with the Employment Report on Friday and plenty of other pieces of economic data to push us around. Locking in and protecting your rate now is likely a wise move but especially for those with closing dates within the next 30 days. Keep in close touch with your mortgage professional!" -Hugh W. Page, Sen. Mortgage Consultant, M.B.A. Capital Partners Mortgage
"Volatile action in rate markets today as we see-sawed from lower to higher rates, then back down again. Pending Home Sales for May were up over April's but down from a year ago, which caused some of the movement. Friday's NFP jobs report looms, and rates typically worsen during the week the report is released. If you're nearing closing, great day to consider locking. It takes a gambler's attitude to float this week." Ted Rood, tedroodteam.com
"Floating this week with so much market moving economic news being released can certainly pay off, but not enough to outweigh the risk. I am taking risk off the table and locking. I'd rather wish I floated than than feel the pain of not locking." -Manny Gomes, Branch Manager, Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED -4.375
- FHA/VA - 4.00%
- 15 YEAR FIXED - 3.5%
- 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).