Mortgage Rates Unchanged--Maybe Not for Long

Mortgage rates were essentially unchanged today, with some lenders in marginally better shape while others were marginally worse.  Some of this discrepancy can be accounted for by mid-day reprices where lenders republish rate sheets on occasions where the mortgage-backed-securities market moves far enough in one direction.  Lenders reprice at different times and under different circumstances, meaning that some underlying market movements can be bad enough to motivate some, but not all, lenders to reprice. 

The rest of the discrepancy is due to the fact that markets simply didn't move much in the first place.  In other words, even without the reprices, some lenders were in better shape this morning while others were worse.  For the most part, the differences are microscopic and the most prevalent 30yr Fixed quote for a top-tier scenario (best-execution) remains at 4.5%.  Paying additional closing cost to move to 4.25% continues to make sense in some cases, but the amount of time required to break even (extra costs divided by monthly payment savings) is closer to 6 years in some cases compared to just under 5 years last week.  This varies by lender, however.

The rest of the week is pretty straightforward from a risk/reward standpoint.  Both are huge and risk will continue to generally outweigh reward as long as interest rates continue to generally be trending higher.  The steeper trends toward higher rates beginning in early May and late June have been consolidating since the July 5th blowout.  "Consolidation" is just another way of saying "moving mostly sideways with plenty of ups and downs but generally with lower highs and higher lows." 

Rates can consolidate for several reasons, but one of the most common is simply because they are moving through a period of weeks that contain inconsequential information relative to some extremely important information.  That's probably what this consolidation owes itself to, and tomorrow is probably the day where we start getting that information.  It's not just one event either, but a rather impressive confluence of events including the Fed's Policy Announcement, an important employment report, and first look at Q2 GDP among other things. 

Markets are also cognizant that the mighty Employment Situation Report is released this Friday, and taken together with tomorrow's events, should be plenty to suggest the next move higher or lower from this consolidative perch.  That's all well and good if the data and events work in favor of lower mortgage rates or even if they're at odds in such a way that rates can at least stay flat, but the risk is that the data is unified in suggesting higher rates.  If that happens, it could happen BIG, and this afternoon would be the time where you'd wish you would have locked.  On the flipside, you could lock today and regret it if rates are able to make a more meaningful recovery, but that's a different kind of regret than the "wish I would have locked" kind.

To be clear, the only suggestion here is simply to be aware that the stakes are higher over the next three days--much higher. 

Loan Originator Perspectives

"Rate markets seem convinced that the Fed will ease off rate stimulus in the coming months, and anything the Fed says tomorrow doesn't seem likely to change that. As I noted Friday, rates are unlikely to go lower, it's only a matter of whether this rate dip holds a bit longer or rates resume their 2013 rise after tomorrow's Fed and Friday's jobs report. -Julian Hebron, Branch Manager, RPM Mortgage

"Roller coaster first 2/3rds of day today as MBS dropped about 12/32 in the space of an hour. While not in the league of June's (and July 5's) volatility, should serve as an attention getter for those who are taking tomorrow's Fed minutes and Friday's jobs report lightly. We lost major ground when the June report posted on 7/5, and those who float into this critical data do so at their own risk." -Ted Rood, Senior Originator, Wintrust Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 4.5%
• FHA/VA - 4.25%
  
• 15 YEAR FIXED -  3.625%-3.75%
  
• 5 YEAR ARMS -  3.0-3.25% 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
• 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).