Mortgage rates rose sharply for the third time this week, bringing them to levels not seen since January 15th. Today's move followed a stronger-than-expected Employment Situation report. This is the most significant economic report each month and when it's strong, rates tend to suffer. Today was no exception as job creation moved back in line with recent averages, defying the expectation that the historically harsh winter weather would make for downbeat data.
Moreover, the report still managed to offer a fairly profound commentary on the effects of winter weather as more than 6 million workers reported missing work last month due to weather. Compared to an average of 70k workers each February who miss a complete week of work due to the weather, today's data showed far more of an effect with 120k workers missing a full week. Had the numbers been more in line with the 70k average, it would have made for an even stronger read on job creation.
Bond markets reacted accordingly. MBS, the "mortgage-backed-securities" that most directly affect mortgage rates, fell immediately to their lowest levels of the week. They managed to improve slightly throughout the course of the day, but only a few lenders released improved rate sheets mid-day. The net effect is a firm move to 4.5% as the most prevalently quoted conforming 30yr Fixed rate for the best-qualified borrowers. When adjusted for day-to-day changes in closing costs, rates moved higher by an equivalent of 0.05% today, making for a .20% move on the week--the worst since August.
Mortgage Rates Hold Stead After Weaker Economic Data
Mar 5 2014, 4:07PM
Mortgage rates held steady today, on average, though some lenders are still in slightly worse shape. Weakness in the markets that affect mortgage rates carried over from yesterday and was poised to push rates even higher today, but weaker economic data helped balance the outlook, ultimately keeping the average rate sheet right where it was yesterday afternoon. The most prevalently quoted conforming 30yr Fixed rate for the best-qualified borrowers (best-execution) remains at 4.375% depending on the lender and scenario. Some lenders are closer to 4.5% while fewer still may be offering 4.25%. When adjusted for day-to-day changes in closing costs, rates moved higher by an equivalent of 0.00% today, but keep in mind that's an average of multiple lenders. Individual lenders may be just slightly higher or lower.
For a second day, Ukraine-related tensions were cooler as far as markets were concerned. The lower the level of geopolitical drama, the worse the implication is for domestic interest rates (because the turmoil fueled some 'safe-haven' demand for US Bond Markets, which spilled over into mortgage-backed-securities, and higher demand = lower rates, all things being equal).
That absence of drama started the day off poorly for mortgage markets, but domestic economic data turned things around, albeit gradually. Both of today's key economic releases--ADP Employment and the ISM Non-Manufacturing Index--were markedly weaker than expected. Weak economic data tends to promote strength in bond markets, leading to lower interest rates. That said, today's strength wasn't given much room to run as it had to be balanced against the aforementioned weakness due to diminishing Ukraine-related headlines.
It continues to be the case that rates are approaching Friday's important jobs data from more neutral territory, and the risk remains that some weakness in the data could be discounted due to the unseasonably snowy/cold weather. That means if the report manages to beat expectations, rates likely won't think twice about moving higher.
Mortgage rates improved Thursday, February 27th and are now getting close to early February's levels, which were the lowest since November 2013. Much of the positivity may owe itself to temporary factors including geopolitical turmoil and month-end trading dynamics in the bond markets that most directly inform mortgage rates. After moving down to 4.375% yesterday, today's most-prevalently quoted rate for the best scenarios remains unchanged, but closing costs will be slightly lower. When adjusted for changes in closing cost, rates would be down 0.03% on average.
If you are in the market for a purchase or refinance, now might be the time to lock in and take advantage of these pricing opportunities.
Mortgage Rates Improve
Feb 25 2014, 4:28PM
Mortgage rates fell noticeably today, after being pushed up against the highest levels in nearly a month yesterday. In that sense, the positivity in the underlying markets allowed rates to breathe a sigh of relief, quickly returning to levels in line with last Tuesday's. When adjusted for changes in closing costs, the improvement was as much as 0.08% in some cases. Some borrowers may experience that in the form of significantly lower closing costs (no change in rate) while others may see an eighth of a point lower in rate for the same (or slightly higher) closing costs. After today, we're much closer to 4.375% being the most prevalently quoted 30yr fixed rate for the very best borrower scenarios (best-execution), though 4.5% shares much of that spotlight.
Keep in mind that the concept of "mortgage rates" involves both that upfront component and the interest rate itself. On most days, markets don't move enough for the actual interest rate to be change (mortgage rates tend to be offered in .125% increments, meaning it would take a lot of movement for a quoted rate to change while closing costs remain level).
While rates rarely move that much in one day (for instance, today was a bigger move, but was only 0.080 compared to the .125 gap between published rates), markets and loan pricing are still constantly moving. Smaller changes are made possible by the upfront cost component. For instance, today's improvement equates to roughly one third of one percent of the loan amount. So for every $100k financed, the benefit of today's drop in rates would be $300 in upfront cost on average. Again, some scenarios will be better served by moving to the next lower rate and adjusting closing costs while others will prefer to keep the same rate and pay less up front. In almost all cases, you should have the option to choose between the two (lowering the upfront cost, or lower the rate).
Freddie Mac has released the results of its Primary Mortgage Market Survey, showing average fixed-rate mortgages (FRMs) continuing to edge higher as 2014 begins, with the 30 Year Fixed Rate averaging 4.53 percent with an average 0.8 point for the week ending Jan. 2, 2014, up from last week when it averaged 4.48 percent. A year ago at this time, the 30-year FRM averaged 3.34 percent. The 15 Year Fixed Rate FRM this week averaged 3.55 percent with an average 0.7 point, up from last week when it averaged 3.52 percent. A year ago at this time, the 15-year FRM averaged 2.64 percent.
"Mortgage rates edged up to begin the year on signs of a stronger economic recovery," said Frank Nothaft, vice president and chief economist, Freddie Mac. "The pending home sales index inched up 0.2 percent in November, after five consecutive months of decline. The Conference Board reported that confidence among consumers rose in December and the S&P/Case-Shiller 20-city composite house price index rose 13.6 percent over the 12-months ending in October 2013."
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.05 percent this week with an average 0.4 point, up from last week when it averaged 3.00 percent. A year ago, the five-year ARM averaged 2.71 percent. The one-year Treasury-indexed ARM averaged 2.56 percent this week with an average 0.5 point, unchanged from last week. At this time last year, the one-year ARM averaged 2.57 percent.
Mortgage rates stayed in line with recent 4-month lows today. In some cases, there was a slight movement in the closing costs associated with prevailing rates, but the rates themselves didn't change. The most prevalent Conforming 30yr fixed quote (best-execution) remained at 4.125%.
Every day since last week's jobs report has been relatively calm for mortgage rates. Even then, there was reason to believe that we could be lacking some direction until the next major round of economic data came in. That culminates in next week's jobs report (which is occurring so close to the previous report due to shutdown-related rescheduling), but the current week can certainly play a role.
Economic data is an important factor in mortgage rate movement for 2 primary reasons. First, there's the basic deductive logic that a stronger economy can support higher interest rates, thus stronger economic data tends to push rates higher, all other things being equal.
The second reason has to do with the Federal Reserve's current role in bond markets. While market participants no longer expect the Fed to reduce asset purchases soon, the longer-term assessment of Fed policy still affects rates. If markets think the Fed will continue to push back the eventual end of their buying program, it gives rates more room to stay or move lower.
These two factors both suggest the same movement in the same circumstance, i.e. weaker data suggests lower rates and stronger data suggests higher rates. But as far as the Fed policy component is concerned, some of the economic data is significantly more important than others--namely the big jobs report next week.
That's not to say that the other data can't have an impact, but it has to be fairly unified in its suggestion or the report has to be one of the more important ones. Tomorrow's Retail Sales data is a good example of a non-employment-related report that has the power to move markets. It's joined by several other reports that together, stand a much better chance to ensure we don't end tomorrow in relatively unchanged territory for a 5th straight day.
Mortgage Rates Improve after Deal passes
Mortgage Rates improved slightly today, recovering from yesterday's losses on average.
The promise of an end to the government shutdown took center stage today, helping both stocks and bonds improve vs yesterday. The full effects of a finalized deal won't be known until tomorrow, assuming the House and Senate pass the legislation tonight, as expected.
From a market-watching standpoint it's important to keep in mind that the reason we're seeing an unexpectedly positive reaction to the debt deal in the world of longer term interest rates has much to do with the fact that we had been seeing an unexpectedly negative reaction to the overall fiscal drama as October progressed. Past examples of similar drama suggest that it's usually over-credited as a motivation for longer term rates (like mortgages) when other factors remain more important.
That's not to say that the drama seen so far and the headlines today aren't capable of causing volatility for interest rates, simply that the volatility is likely to be a "wash" when all is said and done. At that point, the expected source of inspiration remains, as ever, the big jobs report that had been scheduled for October 4th.
Mortgage Rates Rise to 3-Week Highs
Mortgage rates rose moderately
today, bringing them to their highest levels since September 23rd. Though the recent move higher has happened very gradually, it's also been fairly determined with none of the past five sessions seeing a move lower. Today's incremental dose of weakness was notable in that it was finally enough to unequivocally nudge 30yr fixed best-execution
back up to 4.375%, though buying down to 4.25% continues to make sense for some scenarios depending on personal preference.
Last week, we'd increasingly noted that rates had no incentive to move any lower without market participants getting their hands on the important Employment Situation Report--the most important piece of economic data each month and recently postponed due to the shutdown. Despite the lack of motivation to move lower, rates held their ground fairly well--remaining in a new range that was distinctly separate from that which characterizes most of the July-September time frame.
At current levels, we're beginning to blur the lines between these two zones of recent rate levels. The outlook will remain blurry until the shutdown ends and the important economic data is flowing again. It continues to be the case that we can't expect a meaningful move lower without a downbeat jobs report.
Mortgage rates rose slightly today
for the first time in 3 weeks. The difference in rate sheets compared to Friday's latest was minimal, and some lenders were actually slightly better today. Despite the minimal rise, this technically ends an impressive streak of 13 straight days without moving higher. The average 30yr fixed rate was 4.75% when the streak began and now stands at 4.25% (best-execution)
for conforming, 30yr Fixed loans. With the exception of Friday, today's rate sheets are the best since June 19th for most lenders.
Financial markets began the week increasingly enthralled by the 'Government Shutdown' debate, though that's still not much at all compared to mainstream media. Even within financial markets, the 'fixed-income' sector containing the Mortgage-Backed-Securities that most directly affect mortgage rates was much less interested in political developments than the stock market.
Rather than give the impression of being overly concerned by a potential shutdown, rates continue to suggest they're waiting for input from important economic data in order to adjust expectations about Fed policy at the end of the month. The most important event to take in will be the jobs report currently scheduled for Friday, though if a government shutdown isn't averted tonight, that report may be delayed indefinitely (because it's published by the Bureau of Labor Statistics--a government office).
Mortgage Rates' Winning Streak Continues
Mortgage rates fell to new 3-Month lows today.
That makes this the 11th straight day where rates have held steady or moved lower. Conforming, 30yr Fixed rates remained at 4.375%
for most lenders with the improvements coming in the form of lower closing costs or higher lender credit. Some lenders are efficiently priced at 4.25% as well.
As we noted yesterday, the burden of proof is on the scheduled economic data when it comes to determining whether or not the Fed is likely to move back toward its previous stance on tapering. In simpler terms, if the data says the economy isn't improving enough, the Fed is justified in continuing to hold off. As long as they hold off, interest rates benefit in general. This was generally the case today as the economic data was roughly in line with expectations. Tomorrow is another chance for the same thing to happen, but be aware that if the data is stronger than expected, rates will likely move higher.