April 8, 2014
Mortgage rates were lower for a 4th straight day today, further digging in to mid-March levels, but by a smaller amount today. In that sense, the rally following last Friday's jobs report is cooling off a bit, and markets could be getting into a more neutral stance ahead of tomorrow's FOMC Minutes (a more detailed account of the Fed's conversation that resulted in the most recent policy statement, which incidentally also occurred in mid-March).
Today's improvement brings the most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) close to 4.375%, with many lenders there already, though 4.5% is at least as prevalent. Keep in mind that the difference between a 4.5% and 4.375% quote depends largely on the closing costs associated with the rate. One lender might be quoting 4.375% with origination fees or discount points while a lender quoting 4.5% is likely not charging those fees for top-tier borrowers. Adjusting for those changes in closing costs, rates only fell 0.02% today.
At 4 days and counting, this is now officially an extended streak of improvement for rates. The longer it continues, the higher the risk for at least a temporary pull-back. Market participants aren't expecting any sensational surprises in tomorrow's Fed Minutes, but such events always have the potential to move rates in either direction at a faster pace than seen on these data-free days.
Loan Originator Perspectives
"We've seen quite a bit of improvement since Friday, it would be fairly typical to see a little pull back at this point, even if the near term trend were for lower rates. However, tomorrow is a 10 yr auction and should that go well, I would fully expect that we would maintain these levels, at a minimum, but likely see continued improvement. Cautiously floating into tomorrow seems like reasonable risk." -Brent Borcherding, Capital M Lending
"Rates improved for the 4th straight day today as potential stock market corrections and Ukraine Drama kept our momentum moving forward. We get minutes of the Fed's March meeting tomorrow, which can influence rates. We're approaching our best rates since March 1st. What a nice gift for spring home buyers!" -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"Rates continue to improve as the bond rally continued today. We are however getting to a point where the risks of floating may be outweighing the benefits. Not all the juicy pricing has made its way to rate sheets just yet. I would look for better rate sheets tomorrow and then consider locking transactions closing within the next few weeks." -Manny Gomes, Branch Manager, Norcom Mortgage
"The stock markets stumble is helping bonds which in turn helps rates improve. Floating since Friday has not been the risky move it can typically be. With rates approaching a recent low be ready to lock at the first sign of a stock market rally." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
Today's Best-Execution Rates
- 30YR FIXED -4.375- 4.5%
- 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).