June 6, 2014
Mortgage rates remained very close to yesterday's latest levels, though that varies depending on the time of day. Though they returned closer to 'unchanged' in the afternoon, earlier this morning, rates were slightly stronger (lower) after an uneventful Employment Situation Report. This is the most important piece of economic data in the US, and for it to come in so perfectly in line with forecasts is rare. For that to happen a day after the European Central Bank (ECB) adjusted policy almost perfectly in line with forecasts is downright spooky. Bond market trading levels (which ultimately inform mortgage rates) are right where they were hours before yesterday's ECB news, like it never even happened.
It has ended up being the case this week, that much of the potential market movement associated with this important events actually took place before Memorial Day. In other words, expectations for a certain set of actions by the ECB were widely-enough accepted that rates began falling to levels that traders felt were best-aligned with the likely events. Today's jobs report was just a supporting actor in this drama, but there too, the consensus was for the decrease in payroll creation from 288k to 218k. Lower job creation tends to coincide with falling rates, all things being equal.
After some volatility in the immediate run up to the important events, we've ended up very much in line with the rates seen heading into memorial day. In some cases, closing costs are slightly higher now, but the most most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) is still 4.125%--still sharing that designation with 4.25% depending on the lender.
The inspiration for the next concerted market movement is anyone's guess at this point. It's not safe to plan on rates moving in either direction in the short term, but recent levels of volatility suggest there's not much risk in being wrong.
Loan Originator Perspective
"FLOAT--The data of this week didn't move us drastically higher or lower. We're at the high side of the range, and at a strong point of support....I think there is a great opportunity over the next 1-5 days to see improvement in rates." -Brent Borcherding, www.brentborcherding.com
"Today's very important data on job creation came in just a tad below expectations, but that didn't prevent bonds from rallying this morning. However, the rally was short lived as bonds have given up all of their gains. Rates did open better than yesterday but as of mid afternoon, many lenders have repriced for the worse. If you floated into today and didn't lock this morning, I would float over the weekend. I am very hopeful that bonds rally to the low end of the range which is around 2.40 for the 10 year." - Victor Burek, Open Mortgage
"So we escaped this high data risk week with minimal damage to rates and next week looks to be pretty quiet. We seem to be sitting near the top of a shorter term range we've been in which tends to indicate risks are more balanced and floating to take advantage of shorter locker periods may make sense. Be wary, however, and be ready for the unexpected. Keep in close touch with your mortgage professional and be ready to lock if conditions change. Especially, if your closing is within 15 or even 30 days as locking is really never a bad move in this instance." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"Pricing improved this AM as the May jobs report hit expectations, but momentum faded and 11 lenders repriced worse. Float/Lock considerations now back to basics. If you're happy with pricing, lock, if you want to risk floating, do so with the knowledge that your costs/rate MAY worsen as well as improve." -Ted Rood, Senior Mortgage Planner, tedroodteam.com
Today's Best-Execution Rates
- 30YR FIXED - 4.125%-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).