Mortgage rates were moderately higher today, taking most lenders into slightly higher territory than yesterday or last Tuesday (the two worst days recently). Last Tuesday was the game-changer for rates, and every day since then has been in 14-month high territory–today being the worst. The best-execution rate for 30yr Fixed, Conventional loans is now likely moving into the 4.125 range, though buying down to 3.75% may make sense for some borrowers (paying extra upfront cost in exchange for a lower interest rate).
These are the times that try the souls of anyone who began the mortgage process more than a week ago today. That was the point at which things went from “right up there” in terms of losing streaks for rates to “the sharpest 5 week losses in over 10yrs.” Even before garnering that unpleasant distinction, the upward movement in rates was already nauseating. There’s always a temptation to thing “surely, this has to stop some time,” but we’d caution against such assumptions.
The problem with those assumptions is that they tend to actually be true! That’s why they’re dangerous, because it’s the less frequent instances where they’re NOT true that the most damage is done. Several instances of hitting recent multi-month highs in May have fallen into this category with the Friday the 21st being the worst.
At this point, rates for the next few days will be heavily dependent on tomorrow morning’s economic data, where the ADP Employment report has a tendency to cause volatile movement if it’s far outside the range of expectations, even though Friday remains the most important day of the week (and one of the most important this year). If both tomorrow and Friday are favorable for rates, we will likely recover a lot of lost ground, but if job creation is clearly stronger than expected, today’s 14-month highs may look attractive by comparison.
Loan Originator Perspectives
“In this volatile market, waiting for rates to fall back to levels seen
before 5/3’s Job’s report is not the most productive use of time. FICO scores and
loan-to-value ratios have a significant impact on a borrower’s rate
quote, and becoming a lower credit risk in investors’ eyes is one way to
offset the recent spike in interest rates. If borrowers are unhappy
with current rate quotes; they should take a step back and work on
improving their overall credit rating, thereby positioning themselves to
receive the best pricing available.” –Justin Dudek, Mortgage Professional, Supreme Lending
“Tomorrow’s ADP will be interesting I think. Last month it set the tone
for NFP two days later. Made the market think that a low number may
be possible or likely. The revisions to previous months numbers are
what hurt us. Seems like the revisions will be the main focus. Single
most important report in world come Friday and will lead to much debate
on the tappering of QE or not. If you like lower rates, hope for a
big miss.” –Mike Owens, Partner, Horizon Financial Inc.
“Another day, another leg down in MBS prices, seems to be the norm these
days. We didn’t lose a ton of ground (about .25% in pricing), but the
trend is not our friend. Biggest change we’re seeing is that, in
addition to rates being higher, it’s increasingly difficult to pay as
many costs for borrowers in the past month. That 2.5% 15 year loan I
have closing next week is definitely not going to happen again anytime
soon at this rate!” -Ted Rood, Senior Originator, Wintrust Mortgage
Today’s Best-Execution Rates
- 30YR FIXED – 4.0% – 4.125%
- FHA/VA – 3.25% or 3.75%
- 15 YEAR FIXED – 3.125%
- 5 YEAR ARMS – 2.625-3.25% depending on the lender
Ongoing Lock/Float Considerations
- After rising consistently from all-time lows in September and October 2012, rates challenged the long term trend higher, but failed to sustain a breakout
- EU and domestic economic data remain relevant to mortgage rates, but uncertainty over the Fed’s bond-buying plans through the rest of the year is causing volatility
- The further we’ve progressed into 2013, the faster the swings have become
- Fears about the Fed’s bond-buying intentions were proven well-founded on May 22nd when rates rose to 1yr highs after the Fed confirmed their intention to taper bond buying programs sooner vs later
- Just as the pendulum pushed far to the positive side of the rate range in April, the opposite swing occurred in May (now the worst single month for rates on record since 2008)
- (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario. There can be all sorts of reasons that your quoted rate would not be the same as 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).