Mortgage Rates Slightly Higher, but Maintaining Recent Range

Mortgage rates moved higher today, but remain in the range of recently lower levels that has persisted since late September.  Conforming, 30yr fixed best-execution remains at 4.25% though the closing costs would be slightly higher today vs yesterday, or the lender credit slightly lower, depending on your scenario.

Prices of ‘mortgage-backed securities’ that dictate loan pricing (MBS) and other sectors of the bond market have been holding inside an uncommonly narrow range since the government shutdown began.  Bond markets are intensely interested in the economic data that’s been postponed by the shutdown.  Until the data becomes available, it will take something significant to motivate bigger movement.

The first such “non-data” event arrives tomorrow, in the form of the Minutes from the most recent FOMC Meeting.  This isn’t as important an event as the periodic FOMC Policy Announcements, but it may provide additional insight as to how the Fed will approach it’s next meeting at the end of the month.  There has been some suggestion that Fiscal uncertainty will prevent the Fed from considering an adjustment

While this makes sense from a logical standpoint, it might make even less sense for the Fed to forgo tapering if the economic data justifies it.  It will be hard for the minutes from a meeting that finished on September 18th to speak to market conditions that didn’t begin in earnest until October 1st, so there is a fair chance of an uneventful reaction.  In general, the less aggressive the Fed seems to be about decreasing their asset purchases, the better for rates.


Loan Originator Perspectives

“Another day in “Shutdownville” oh what to do? Most Lenders are still
making loans happen. Keep pace with your Originator. Rates remain in
consumers’ favor–still close to the best levels since June. ” –Bob Van Gilder, Finance One Mortgage

“Investors, borrowers, and originators watched with baited breath as
nothing of substance developed in DC stalemate. Something will happen
soon, one way or the other, but in the meantime we’re range bound.
Important not to take current rates for granted, when the logjam breaks,
market will have a lot of data to digest in a short period.” –Ted Rood, Senior Originator, Wintrust Mortgage


Today’s Best-Execution Rates

  • 30YR FIXED – 4.25%
  • FHA/VA – 4.0-4.25%
  • 15 YEAR FIXED –  3.375-3.5%
  • 5 YEAR ARMS –  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

  • Uncertainty over the Fed’s bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher 
  • Expectations for “tapering” (a reduction in “QE3” asset purchases) mounted over the summer and September 18th was seen as the most likely day for a potential tapering announcement
  • But the Fed decided to keep a change in QE amounts on hold until the economy could more convincingly show that rising rates (which had been rising because markets expected the Fed to taper!) wouldn’t be too big an impediment to further improvement. 
  • That’s resulted in the first meaningful “pause” in the “rising rate environment” since it began in earnest in May, 2013.   This won’t necessarily be an ongoing move in the other direction, and we’re nowhere near May’s rates yet, but it’s a good opportunity to get back in the market if rising rates pushed you out sometime between now and then.
  • The extent to which that remains true relies on incoming economic data.  Strong data will increase the speculation that the next Fed meeting will contain a reduction in purchases
  • (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).

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