Mortgage rates were flat to slightly higher today, depending on the lender. Overall, rates are still very close to their best levels since June 19th with Friday being the only noticeably better day for a few lenders. It’s worth noting that more than a few lenders are in no worse shape than they were on Friday. The movement has been quite modest. Conforming 30yr Fixed rates remain most efficient (best-execution) at 4.25% though some lenders have attractive buydowns to 4.125% while others remain at 4.375%.
The modest movement be somewhat counterintuitive given the clamor of recent headline events and the seemingly dire implications for the the economy. One explanation is that financial markets often begin moving in the direction implied by the outcome against which they’re defending. That’s a pretty confusing sentence, so let’s just say this: markets had been guarding against a shutdown by moving lower in rate. In that sense, if the shutdown was avoided, we may well have seen rates move higher more quickly today. The actual movement was small enough that it doesn’t insist on being scrutinized.
The other explanation–and one that works by itself or in conjunction with the previous thought–is that markets care far less about political drama than they do about things like this week’s big employment data. In fact, the biggest piece of employment data may now be delayed due to the shutdown, leaving financial markets to figuratively ask “what now?” It’s as if we were all dressed up with nowhere to go today, and thus simply drifted with a breeze that happened to be toward slightly higher rates.
We may be able to confirm the extent to which markets are eying employment data tomorrow morning as we will get the ADP Employment Report. This one isn’t produced by the government and thus won’t be subject to a delay. It’s designed to track the government report in terms of its movement and even on normal weeks can cause quite a stir if it suggests a surprise is on the way when the official report is normally released 2 days later. The fact that the official report may not be following this week could place extra emphasis on ADP’s numbers. Weaker-than-expected employment may help rates stay or move lower, while stronger-than-expected numbers could continue applying upward pressure.
Loan Originator Perspectives
“Govt. shutdown forces thousands to flee from their homes!! Dogs living
with cats!! Zombies attacking kids at local playgrounds!! Well, not
exactly. In fact, rates remain fairly unscathed at this point. Though
there is an upward bias. May be some bumps in the road as IRS and SSA
have limited services, which will affect the mortgage process. If you
are being offered a rate that is attractive to you take it. You can’t
lose by being able to sleep at night.” –Bob Van Gilder, Finance One Mortgage
“We’re drifting higher on rates today, and while current ranges haven’t
been broken, it may be time for floating borrowers to lock in pricing.
Surprising that the government shutdown has helped equities but not MBS,
conventional wisdom was that stocks would suffer. Borrowers with FHA
and USDA loans in process should contact their lender to discuss the
shutdown’s potential effect on their loans.” –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).