June 4, 2014
Mortgage rates were higher yet again today. This time around, the move wasn't quite as brisk as the past few days. In fact, morning rate sheets were slightly stronger than yesterday's in some cases. But mid-morning market volatility prompted most lenders to issue mid-day reprices, raising rates to the worst levels of the week.
The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) is now back up to 4.25%, though 4.125% is still close for some lenders. Some borrowers will see today's weakness in the form of higher closing costs vs yesterday. Expressed in terms of effective interest rates, the increase equates to 0.03%.
Tomorrow is potentially a very big day with the release of data that financial markets have been very anxious about. The European Central Bank (ECB) is widely expected to do "something." No one knows exactly what that will be, but the best guess is that it involves cutting policy rates. From their, they may also announce other liquidity measures (so-called 'long-term refinancing operations' or LTROs). There's an outside chance they'll even embark on some form of asset purchases similar to quantitative easing in the US.
The point is that there are a lot of variables with respect to tomorrow's ECB news. Depending on what they do (or don't do), as well as the comments during the press-conference (begins at 8:30am) markets could react in a big way. From there, the hugely important Employment Situation report on Friday morning could either add to the momentum, or counteract it. Either way, the prospects for volatility are as high as they've been so far in 2014. There's no way to know how rates will move over the next 2 days, but the moves could be big.
Loan Originator Perspective
"Unless you are looking for the thrill of a gamble, there is no reason to do anything but LOCK at this point. Rates have moved back into a position where the next move can go either way and the next 2 days data will be the impetus. " -Brent Borcherding, www.brentborcherding.com
"Despite weaker jobs data this morning, the pain for rates is continuing. Tomorrow, the pain will continue or we will rally, depending on what the ECB does regarding their policy statement. In the past, they have disappointed the markets by being all talk with no action. I think we do get some action, just not sure if it will be enough which makes floating highly risky. If things go our way though, we could see a very nice rally. At this point, float at your own risk. You will either be nicely rewarded or will have to suffer the consequences." - Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.25%
- FHA/VA - 3.75%
- 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. From there, they settled into a flat range mostly consisting of 4.375 and 4.5%, but with occasional forays to 4.25 and 4.625%.
- The bias had been very slightly toward higher rates, it reversed course in early April as expectations grew concerning European Central Bank easing. On several occasions, those expectations would go on to overwhelm domestic economic data--normally the main source of guidance for market movements.
- As of the third week in May, rates were as low as they've been since June 2013, more than confirming a break below the 2014 range. They remained in that range through month-end and grew more volatile ahead of the June 5th European Central Bank Announcement.
- Looking back at recent movement, it's had a disconcertingly small amount to do with 'normal stuff' like economic data and Fed policy. Temporary and unpredictable factors currently account for too much of the movement to make firm bets on rates moving either direction in the short term.
- (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).