Mortgage Rates Were Higher Even Before the Fed

By: Matthew Graham •

Mortgage rates moved moderately higher today, bringing them back in line with some of last week's offerings but certainly not outside the recent range.  Today's biggest risk in terms of market movement had been the afternoon's FOMC Minutes (the more thorough recap of discussion at the Fed's policy setting meeting at the end of October).  As it happened, the biggest market movement was seen overnight in response to European economic data, leaving the Fed Minutes to merely cause some inconsequential afternoon volatility.

The bond markets that underlie mortgage rates were weaker right out of the gate this morning, resulting in higher rates to start the day.  4.0% remains the most prevalently-quoted conforming 30yr fixed rate for top tier borrowers, but 4.125% is also a contender after this morning's weakness.  While financial markets did experience a bit of volatility following the Fed Minutes, it wasn't enough to prompt lenders to revise rate sheets in the afternoon.

 See Rates from Lenders in Your Area


Loan Originator Perspective

"Today's trading was heavily influenced with overseas pressure. The Fed minutes brought a quick rally that disappeared just as fast. Through it all, we are still in the middle of the recent range, somewhat consolidating for a breakout. The breakout can go in either direction. I believe rates will move lower, however the right thing to do is lock any loan closing within 15 days here." -Constantine Floropoulos, Quontic Bank

"Once again, we're treading water within current ranges, the price differences from day to day (and week to week lately!) are relatively minor. I locked a couple of deals today, my clients were very happy with current pricing, and weren't gamblers by nature." -Ted Rood, Senior Loan Officer, MB Bank

"The minutes from the last FOMC meeting have come and gone with no surprises. So my advice continues to be the same...float until you are within 15 days of funding. MBS are following Treasuries lead by moving sideways. We have solid support overhead and rates continue to hold well within the downward trend channel." -Victor Burek, Open Mortgage

 

Today's Best-Execution Rates

  • 30YR FIXED - 4.0-4.125
  • FHA/VA - 3.5-3.75
  • 15 YEAR FIXED -  3.25
  • 5 YEAR ARMS -  3.0 - 3.50% depending on the lender


Ongoing Lock/Float Considerations

  • The hallmark of 2014 has been a narrow range in rates.  Too many market participants bet on rates going higher in 2014, and markets punished that imbalance with a paradoxical move lower.

  • European markets helped that process along and continue to play a prominent role in keeping US rates lower than they otherwise might be.  
  • For most of the Summer and early Fall months, rates held a narrow range of 4.125% -4.25% (essentially where the 2014 rate recovery has bottomed out) and finally broke to a 3.875%-4.0% range in mid-October.  It's too soon to tell if this is a brief window of opportunity or the continuation of 2014's very gradual improvements.

  • As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.'  Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy.  It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).