Mortgage Rates Tentatively Lower

Mortgage rates took Friday's improvements one step further today, moving slightly lower.  The most prevalently quoted rates remain between 4.5 and 4.625 percent for ideal, conforming 30yr Fixed scenarios  (best-execution) with the improvements being seen in the form of lower costs.  For the sake of reference and comparison, today's rates fall somewhere between last Wednesday's and Tuesday's for almost all lenders.

There were no significant events on today's calendar offering motivation for the bond markets that underlie mortgage rates.  Volatility was absent for both US Treasuries, which provide a good sense of longer term trends, as well as Mortgage-Backed-Securities (MBS), which most directly affect lenders' rate sheets.  Despite the modest improvements, both Treasuries and MBS looked to be leveling-off more than they were continuing into stronger territory.

The week will continue to be light in terms of scheduled events and investors' focus is already mostly turned toward next week's FOMC Announcement.  That's the Fed policy statement at which some market participants think the Fed could move to reduce asset purchases.  Economists are fairly divided on that, however, with about half seeing it March and the other half seeing the reduction coming some time between now and then. 

Only 1 in 7 surveyed think it will happen next week, but for what it's worth, that's not much less than those who DID NOT see it happening in September.  Bottom line: it probably won't happen in December, but the fact that it might is keeping markets on their toes.  The net effect on rates is that they'll be hesitant to make any major moves between now and then.  Surprisingly strong or weak economic data on Thursday morning could be a bit of an exception.

Loan Originator Perspectives

"Slight gains on a slow December Monday as investors contemplate next week's FOMC meeting and statement. Fed taper appears inevitable, only question is how fast and soon. With that in mind, we'll take any gains, but potential for substantial gains is limited at best. " -Ted Rood, Senior Originator, Wintrust Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 4.5 - 4.625%
  
• 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 and Fiscal Policy has been making for a tough interest rate environment where we're not seeing sustained improvement unless it's a correction to even bigger deterioration.
• The Fed's bond buying is the key consideration--not just the initial reduction (aka "tapering"), but the general pace of withdrawal.  We've gone from tapering being a "sure thing" in September, to it being on hold until March 2014, and now December 2013 is increasingly possible after the most recent Employment report on Nov 8th.
• Markets continue to be most interested in economic data and its suggestions about the longer term trajectory of the economy.  This will shape expectations for Fed policy in the coming months, and thus inform the direction of interest rates.
• The stronger the data the more likely the Fed is seen as reducing asset purchases.  Rates would rise under this scenario, but the Fed indicated its cognizance of high rates creating headwinds for the recovery, and this suggests they'll attempt to keep the pace of rising rates moderate as long as inflation isn't adversely affected. 
  
• (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).