Mortgage Rates Continue Lower Despite Market Reversal

Mortgage rates moved moderately lower on average today.  Not all lenders improved, but most did.  Those who were in similar or higher territory compared to yesterday's latest rates were in no way close to the previous day's rates, or even those from yesterday morning. 

If that was a bit too circuitous to follow, try this: mortgage rates got rocked yesterday, in a good way.  The big move happened in the afternoon.  Every lender is in much better territory today vs yesterday morning, but some of the lenders had already adjusted rates quite a bit by yesterday afternoon, and thus, had less catching up to do today.  On average, the gains were solid, bringing us to the lowest levels since August 12th.  

Conforming, 30yr Fixed rates remain at 4.5% with some of the more aggressive lenders still competitively priced at lower rates (best-execution).  This doesn't mean that 4.25% at one lender would be equivalent to 4.5% at another lender in terms of closing costs--simply that the 4.25% scenario may be worth looking into to see if the extra cost makes sense for you.

The story behind today's rate movements is really yesterday's big news regarding the Fed abstaining from any significant policy changes.  As far as the trading levels of mortgage-backed-securities (MBS) that underlie mortgage rates, they actually would indicate higher rates today.  This is one of the very few times you'll see rates move opposite MBS and Treasury yields.  Reason being: lenders aren't able to keep pace with movement that swift and unexpected.  Furthermore, they couldn't run the risk of a bigger reversal today, because they'd be on the hook for locked rates that were too aggressive.  As such, they passed along a good amount of improvement yesterday and had some more in reserve for today, allowing for improved pricing despite the market reversal.

Loan Originator Perspectives

"Rate markets breathed a sigh of relief today as 90% yesterday's Fed gains carried over to today. While we lost a small amount of ground (enough for some lenders to reprice), rates are still significantly better than prior to the Fed Statement, Just locked a purchase, rate was .25% better than Tuesday's pricing, have to love that. Lenders and borrowers should not be complacent, however. We may have seen about all the improvement we're going to, don't assume rates will continue dropping." -Ted Rood, Senior Originator, Wintrust Mortgage

"Tough call on whether to lock or float, and it must be viewed case by case. Some lenders have passed along healthy gains, while others have been quite stingy. If you have been floating, and your rate is now .25% lower, I would lock and sleep well. If not, I would float and see what happens tomorrow and over the weekend. I would definitely float if I was closing in over 30 days." -Victor Burek, Open Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 4.5%
  
• FHA/VA - 4.25
  
• 15 YEAR FIXED -  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 brings us to a more uncertain situation than we've been in recently.  It's too soon to declare the "rising rate environment" defeated, but September 18th marks our best recent opportunity for an extended hiatus.
• 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).