Mortgage Rates Continue Lower Ahead of Fed Minutes

Mortgage rates logged a second day of solid improvements following Friday's frantic move higher.  By the end of the day, rates had recovered more than half of ground lost on Friday.  Variations from lender to lender continue to be wider than normal, but almost all moved lower today by roughly similar amounts.  The Conventional  30yr Fixed  best-execution is now firmly back to 4.625 only.  That doesn't mean that's the lowest rate out there--simply that most lenders are most advantageously priced at 4.625 assuming a flawless scenario.  Some borrowers may find value in sacrificing up front savings for a lower rate.

Keeping in mind that almost all of the recent volatility in mortgage rates is a function of Fed policy expectations, it's important to note that we have "FOMC Minutes" coming up tomorrow.  When the Fed conducts their policy meetings (on June 18th and 19th in this case) they release their official policy statement on the second day of the meeting.  That statement is carefully worded and highly condensed, so the Fed offers additional transparency on the evolution of policy by publishing the more robust (and sometimes "less carefully worded") minutes from that meeting. 

It's that "less carefully worded" part that we'd have to defend against.  Given the spike in rates that followed the June 19th Announcement, it's hard to imagine what additional damage the minutes could do.  In fact, this is a fairly common sentiment in financial markets.  The thinking is that markets weren't entirely convinced that the Fed would confirm their intent to reduce asset purchases, but now that they have, the only way to do any more damage would be to accelerate the timeline or increase the amount of tapering beyond the consensus of "September and $20 bln."

Despite that apparent logic, things are rarely that simple.  The current environment is still highly charged and market participants are more than willing to seize on any clues in the text of the minutes that might lend themselves to inference.  There are also fewer of them around due to summertime vacations.  This makes it easier for momentum to develop and follow through.  Bottom line, big swings continue to be possible.  Tomorrow is best near-term opportunity for this week's positive momentum to be wholly confirmed or wholly rejected.  Even though further improvement is possible (and enticing to consider), if you found yourself wishing you could go back and lock on the day before the jobs report, today brings you more than half-way back to those levels.

Loan Originator Perspectives

"Bit of a waiting game in MBS Land today as markets look to tomorrow's Fed minutes release. Although September tapering is already priced in, any overly optimistic Fed Speak could throw further fuel rising rates. We'll hope for typical Fed generalities, and that last Friday's losses become a memory rather than a trend." -Ted Rood, Senior Originator, Wintrust Mortgage

"For my customers that are out shopping for new homes, the only thing you can do is keep them posted of the volatility in the market, and let them know that rates could change at any time. Today has been a good day for rates, but as we've seen, we could see another sell off tomorrow! So if you have a customer that is out shopping at their max approval amount, I would be very careful with what they are looking at, and let them know they may qualify for that house on Monday, but not qualify on Tuesday! Communication will now be more important than ever." -Jason York, VP of VA Operations, Prime Mortgage Lending, Inc

"Rates have dipped a little, but floating is still too risky. This may be a pause on the way higher and tomorrow will either confirm this or keep us flat in my opinion. I see no need to hold out for a lower rate on your purchase money loan. Lock what you can get to avoid any chance of rates going higher. " -Mike Owens, Partner, Horizon Financial Inc.

Today's Best-Execution Rates

• 30YR FIXED - 4.625%
• FHA/VA - 4.25%  -4.75% (depending on lender buy-down structure)
  
• 15 YEAR FIXED -  3.75%
  
• 5 YEAR ARMS -  3.0-3.375% 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
• Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
  
• Fears about the Fed's bond-buying intentions were proven well-founded on May 22nd when rates rose to 1yr highs after the Fed indicated their intention to taper bond buying programs sooner vs later
• The June 19th FOMC Statement and Press Conference confirmed the suspicions.  Although tapering wasn't announced, the Fed made no move to counter the notion that they will decrease bond buying soon if the economic trajectory continues
• Rates Markets "broke down" following that, as traders realized just how much buy-in there was to the ongoing presence of QE.  These convulsions led to one of the fastest moves higher in the history of mortgage rates and market participants have not been eager to be the among the first explorers to head back into lower rate territory until they're sure they'll have some company.
• (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).