Mortgage Rates Weather Storm Of Volatile Events, One More To Go This Week

By: Matthew Graham •

Mortgage Rates ranged from unchanged to slightly improved today after facing a tremendous amount of uncertainty in the past two days.  Yesterday's FOMC Announcement caused plenty of volatility in the secondary mortgage market resulting in higher rates across the board.  We then set our sights on the European Central Bank's policy announcement that took place early this morning before domestic markets opened.  Most market participants considered the ECB announcement to actually be the more significant of the two in terms of impact on interest rates.

While the ECB Announcement did generate the highest trading volumes of the week, the movement was in our favor today.  Because it took place before the time of morning that lenders normally release rate sheets, it had a positive impact in most cases though the improvement was moderate.  Essentially the FOMC and ECB news "cancelled each other out" as far as trading levels in the secondary mortgage market are concerned, leaving us in roughly the same territory as Wednesday morning.  Conventional 30yr Fixed Best-Execution remains centered on 3.5% with some viability at 3.375% depending on the lender and scenario.

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(Read More:What is A Best-Execution Mortgage Rate?)

As far as volatility-inspiring events go, that MOSTLY does it for the week, but there's one 'biggie' left to go.  On any other week (or at least on any other week without FOMC and ECB announcements), tomorrow's Employment Situation Report would clearly be the most significant piece of data.  It's still extremely important and could have a big impact on interest rates, but that impact is perhaps somewhat lessened due to its proximity to other uncommonly important events. 

If the jobs report is much stronger than expected, then we can likely expect higher rates tomorrow.  We think that damage will be somewhat mitigated by the Euro zone's inability to push through new monetary policy (something that was evident in this morning's news), so we're not necessarily as scared of the Jobs data as we normally would be.  That said, it continues to deserve respect as a major POTENTIAL mover.  It all depends on how far away from the consensus it comes in.

Long Term Guidance: We'd continue to advocate against trying to "get ahead" of current market movements due to the high degree of uncertainty.  In the past, we would have interpreted that advice as a suggestion to lock, but in the recently "low and sideways" environment, it's probably better-read as a suggestion to go with the flow of gradually lower rates until we see the pattern definitively break.  It's a reasonably safe assumption that European concerns will generally continue to apply downward pressure on rates although there are no guarantees that the right piece of news or economic event couldn't mark "the turning point" at which rates bottom out.  On any given day, rates have been at or near all-time lows and in the grand scheme of things, unable to move lower as quickly as Treasuries for example.  So although there is potential gain from floating, it's still a historically excellent time to lock if you'd prefer to take the risk off the table.  

Loan Originator Perspectives

Brent Borcherding, Capital M Lending

It is still all about Europe and the landmark event that turned out to be a non-event in Europe is behind us. If you have to lock tomorrow, lock now, and avoid any chance at a one day of worsening, but I don't believe NFP has any where near enough potential surprise to the upside to effect rates negatively for the next week or two. If you've floated this far, let 'er ride.

Victor Burek at Benchmark Mortgage

The ECB proved to be all hat and no cattle this morning, helping mortgage rates to improve. We still have non farm payrolls to get through tomorrow which always has the ability to move the markets which makes floating through it risky. I feel the report tomorrow is gonna be weak and mortgage rates will either hold steady or improve but float at your own risk.

Mike Owens, Partner with HorizonFinancial, Inc.

Rates vs the all time lows are not much worse, but in any case worse is worse. I'm finding that the cost is .25% to .625% worse than the all time low. I am always cautious and always recommend locking. Too much risk short term that rates spike even if they do retreat at a later date. You can't go wrong locking. Floating is a risk vs reward decision. The reward is border line greed in my opinion.

Today's BEST-EXECUTION Rates 

  • 30YR FIXED -  3.5%, Some Approaching 3.375%
  • FHA/VA - 3.25-3.5% (varies more between lenders than conventional 30yr Fixed)
  • 15 YEAR FIXED -  2.75 - 2.875%
  • 5 YEAR ARMS -  2.625-3. 25% depending on the lender

Ongoing Lock/Float Considerations 

  • Rates and costs continue to operate near all time best levels
  • Current levels have experienced increasing resistance in improving much from here
  • Rates could easily move higher or lower, but given the nearness to all time lows, there's generally more risk than reward regarding floating
  • But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
  • (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).