Mortgage Rates Just Slightly Lower Ahead of Yellen Testimony

Mortgage rates improved just slightly today, building moderately on Friday's strength following the weaker jobs report.  That having been said, the pace of improvements is a bit lacking compared to historical examples of reactions to weak jobs numbers.  The most prevalently quoted conforming 30yr fixed rate for the very best borrower scenarios (best-execution) remains at 4.375% with 4.25% and 4.5% both still fairly close.  When adjusted for day to day changes in closing costs, rates fell an equivalent of 0.02% today.

One potential reason for the lack of fervor in moving to lower rates is the pace of the improvements seen so far in 2014.  In other words, they fell at the second fastest pace in over 2 years, and as such, may have run most of the course they were willing to run, even before the jobs numbers were announced.  After all, the best rates of the year were seen last Monday, while Friday's improvement only got us halfway back to those levels.

If markets are waiting for more guidance before deciding on their next move, it could come in the form of Janet Yellen's first congressional testimony tomorrow and Thursday.  These are regularly scheduled events, also known as Humphrey Hawkins speeches/testimonies, and can be a focal point for market participants seeking to get inside the Fed's head.  There are no big surprises expected as far as changes in Fed policy being broadcast, but because this is the first instance with a new Fed chair, markets may be a bit hesitant to move much in either direction before they hear from her.

Loan Originator Perspectives

"If you floated over the weekend, lender pricing is a little better today. We have no high impacting data til later in the week, so I would not be in any hurry to lock. Seems like both stocks and bonds are waiting on more information before they make a move and we may not get that information until Thursday when initial jobless claims and Retail Sales data is released." -Victor Burek, Open Mortgage

"I'm staying committed to the Lock your loans philosophy, for now. We seem to be at or near the bottom of a range and when comparing the available room for short term improvement relative to the potential for worsening.... the risk vs reward analysis shows the risk is too high, currently." -Brent Borcherding, Capital M Lending

"Some further gains in rate markets today after January's NFP miss on Friday, but we're still within last week's range. The fact rates haven't dropped more following the tepid report shows we'd need some major economic misses for rates to move lower. If you're inclined to float, I'd do so cautiously, and without the expectation of too much further improvement." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 4.25% -4.375%
  
• FHA/VA - 3.75%-4.0%
  
• 15 YEAR FIXED -  3.375%
  
• 5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

• The prospect of the Fed reducing its asset purchases weighed heavy on interest rates for the 2nd half of 2013, causing volatility and generally pervasive upward movement.
  
• Tapering ultimately happened on December 18th, 2013.  Markets had done so much to come to terms with it ahead of time that it essentially just confirmed the the 6 month move higher in rates, but didn't make for another immediate spike higher.
• Rates moved gradually higher into the end of 2013 and began to move gradually lower into the beginning of 2014, helped along by a weak employment report on January 10th.  This report raised doubts as to whether or not the Fed would continue tapering asset purchases at the same pace, but it was ultimately a flare up in emerging markets and weakness in stocks that fueled bond-market positivity and allowed rates to hit 2014 lows on the same afternoon the Fed reduced asset purchases by another $10bln.
• With that in mind, further interest rate resilience in the face of tapering only looks limited by ability of emerging markets and equities to continue being weak.
• (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).