April 29, 2014
Mortgage rates were slightly higher today as a result of bond market weakness late yesterday and again this morning. Some of that weakness has been erased this afternoon, but trading levels in MBS (the mortgage-backed-securities that most directly affect mortgage rates) still aren't back to yesterday morning's range. Rate sheets were worse this morning, but the market improvements during the day have allowed a few lenders to revise rate sheets for the better. On average, most lenders are still showing higher costs compared to yesterday's latest levels. The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains at 4.375% in most cases. Today's higher costs translate to an increase of 0.02% effectively.
From a strategy standpoint, nothing has really changed from yesterday except that we're that much closer to the week's important events. Tomorrow is really the first day of the week where heavy hitters show up. These include the GDP data in the morning and the Federal Reserve's policy announcement in the afternoon. Markets aren't expecting any significant changes out of the Fed, nor are there any of the surrounding events (like the press conference or the economic projections) to shake things up this time, but the fact remains that any Fed Announcement is a big potential market mover.
Ultimately, the only takeaway that matters this week will be Friday's Employment Situation numbers (the 'nonfarm payrolls' more than the unemployment rate). Everything between now and then is more of a pre-game show. The fact that the jobs report has so much more market-moving potential than any other scheduled event often serves to mute the impact of those events to some extent. In general though, the most profound benefits of floating a rate right now can only be realized if you commit to floating through Thursday night, and then get lucky with weak jobs numbers on Friday morning. That's not an advisable risk to take.
Loan Originator Perspectives
"If you missed locking yesterday, today's pricing is only slightly weaker. In my opinion it is way to risky to float through the employment data this week. Even if the data comes in worse, rates do not have much room to improve as the Fed is continuing with the taper. If the data comes in better than expected, rates could jump rather quickly. The last 3 months as NFP Friday approached, rates got worse and worse each day. If you missed locking yesterday, you might want to consider pulling the trigger today." -Victor Burek, Open Mortgage
"LOCK--While pricing today remains similar to the day before, I still believe that locking is the right choice as there is a greater likelihood of rates rising into Friday than them going lower. NFP is the big data point this week and a consumer should protect against rising rates, right now." -Brent Borcherding, www.brentborcherding.com.
"Of course, your risk tolerance is still the determining factor in any lock/float decision on mortgage rates but a high risk event on the near term horizon (Friday Employment Report) still favors protecting and locking your mortgage rate. The old cliche applies here. Better safe than sorry!" -Hugh W. Page, Sen. Mortgage Consultant, M.B.A. Capital Partners Mortgage
"Locking before the NFP report on Friday is a wise and safe move. Floating into the report is a gamble in my opinion and if rates move down, a rate renegotiation is an option. I would much rather lock my rate and see rates dip than float and see them rise. Too much to lose with a big blow out number for new jobs. " -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
"Friday is definitely the big day, but don't overlook tomorrow as ADP Employment, GDP, and the Fed Announcement can certainly have an effect. Rates are stuck in the middle of a 3-Month range, but locking today is a good move in my opinion as any optimism in tomorrow's data can move us right back to the top of that range." -Steve Chizmadia, Mortgage Consultant, American Capital Home Loans
Today's Best-Execution Rates
- 30YR FIXED -4.375
- FHA/VA - 4.00%
- 15 YEAR FIXED - 3.5%
- 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).