July 3, 2014
Mortgage rates were higher yet again today, taking their cue from the Employment Situation report. This is the big "jobs report"--the most important piece of economic data month in and month out. It is widely expected to always be the key consideration on the day it's released and today was no different.
Less expected was just how strong it was--at least at the headline level. The most important component of the report is the Nonfarm Payrolls reading (which is why you'll sometimes see it referred to as NFP), which came in at 288k today compared to a forecast of 212k. The forecast is derived from the median of multiple analayst/economist forecasts submitted to major data aggregators like Reuters and Bloomberg. When the actual result is stronger than expected, bond markets--and thus mortgage rates--tend to suffer.
Today was no exception as the underlying markets that determine mortgage rates were noticeably affected right out of the gate. But by the time lenders issued the day's first rate sheets, things had recovered slightly. This allowed today's rise in rates to be less severe than it otherwise might have been. Reasons for the resilience include Europe's affect on US markets this morning (Europe was moving the other way, and some bond market strength spilled over to US markets, thus softening the blow from NFP) as well as the weakness already seen over the past few days. In essence, markets were already bracing for this possibility to a large extent.
After an extended run at 4.125% as the most commonly quoted rate for top tier borrowers, yesterday's weakness reintroduced 4.25%. Today's weakness quite simply confirmed the move back to 4.25% as the more prevalent quote, but thankfully hasn't even raised the possibility of a move to 4.375% yet.
Markets are closed tomorrow in observance of Independence Day and lenders will not be releasing new rates or accepting new locks. So if you wish to lock before the weekend, now's the time.
Loan Originator Perspective
"A strong Jobs Report sent mortgage pricing down again today ahead of the holiday weekend, however, much of the weakness appeared to be priced in already and the damage was much less than it could have been. Some rate friendly news out of the European Central Bank also seemed to mitigate some of the damage. With a quiet week coming up with Economic Data releases we may get relative calmness but consumers should stay on the defensive and keep in close contact with their mortgage professional. Floating for now appears safe for borrowers closing beyond 30 days." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"The Jobs Report arrived and with it came a blow out number and the lowest unemployment rate since the great recession began. One would think equities would rally big on the news and mortgage bonds would sell off in a big way. Neither really happened and bonds were able to recover most of their losses. Floating over the long holiday weekend makes sense as we are currently at the top end of the rate range." -Manny Gomes, Branch Manager, Norcom Mortgage
"It appears a stronger than expected NFP was almost totally baked in. Following the much better than expected data, MBS moved lower at the open forcing lenders to worsen rate sheets from yesterday. As the day has progressed, MBS have regained much of the losses but don't expect lenders to reprice better ahead of the early close and 3 day weekend. If you floated into this report, I would continue floating until Monday. Have a safe 4th of July weekend." -Victor Burek, Open Mortgage
"Not a stellar week for rates, and today the trend continued. The June jobs' report was stronger than expected, reinforcing the rational for rates rising. We're close to breaking through the top of our recent rate range; any more upbeat data may push us through. Floating is risky at this point, especially for anyone closing in the next 30 days. Have a great 4th, everyone." -Ted Rood, Senior Mortgage Planner, tedroodteam.com
“Considering the big beat on the jobs report and upward revisions to previous reports, rates have weathered the storm pretty well. Rates could have really escalated, but they have increased only moderately, so this is a win for bond markets.” -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
Floating to Monday is the best decision, in my opinion. The large NFP beat did little to move rates higher and I still hold the belief rates are going to be held at this level if not pulled lower over the coming weeks. As always, stick to what your level of comfortability is but I think the long weekend float will pay dividends." -Brent Borcherding, www.brentborcherding.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 hallmark of 2014 so far has been a disconcertingly narrow range in rates. Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower.
- As of June, rates were officially lower year-over-year, but that's due to rates' path higher in 2013. The current path in 2014 remains sideways.
- European markets continue to play a nagging role in the background, generally helping rates in the US remain lower than they otherwise might be.
- From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range. A rally into late May stood a chance to act as this break, but rates have since returned to what were previously the lower limits of the 2014 range.
- As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.' Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy. It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).