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.
On Wednesday, the Fed announced they would "hold-off" tapering the Quantitative Easing plan and continue to purchase mortgage backed securities. As a result, the market surged on the good news, causing interest rates to improve by nearly .250% to their lowest in 4 months.
The Fed only meets 8 times a year and only 4 of those meetings boast the full slate of events that include updated economic projections from Fed governors and the press conference with the Fed Chairman. While every meeting ends with a policy announcement, the specific task of adjusting asset purchases is seen as coinciding with one of the meetings where the Chairman can further discuss the decision in the press conference.
When the Fed abstained from cutting asset purchases in the June meeting, markets generally accepted that today's meeting would be the most likely opportunity to announce a plan to cease the purchase program. Not everyone agreed. Detractors cited early warning signs that the economy wouldn't grow as quickly as the Fed expected (if at all) in light of interest rates that had risen "too fast." That logic notwithstanding, fears remained that the Fed wouldn't have enough hard evidence to make the same determination, and today remained the consensus for a tapering announcement.
Mortgage rates improved again today, bringing them to their best levels of month, just on par with rate sheets from late August. Conforming, 30yr Fixed rates held at 4.500% in some cases with the improvement being more readily seen in the form of lower closing costs. In others, the the most efficient combination of upfront cost and monthly payment (best-execution) fell to 4.375%.
The Federal Reserve is very much in focus for several reasons. Of course the upcoming meeting and announcement on Wednesday have been in focus for several months as they've increasingly become the most likely venue for the Fed to signal a reduction in asset purchases (aka "tapering"). Wednesday remains important for that reason, but also because the text of the announcement, the press conference with the Chairman and the staff economic projections will help build the market's sense of how the Fed will handle itself as the tapering process (assuming it's announced) continues to unfold.
These things are important to mortgage rates because the nature of Fed policy with respect to those asset purchases has a direct effect on the mortgage-backed-securities (MBS) that underpin the world of mortgage rates not to mention the general effect on economic and market momentum. In other words, sentiment surrounding Fed policy can move "bond markets" in general and specific decisions regarding MBS purchases can have an additional positive or negative effect on Mortgage Rates specifically.
Even outside the realm of policy adjustments, the Fed is a market moving consideration. Today, for instance, the fact that Larry Summers withdrew from consideration as the next Fed Chair gave both sides of the market (stocks and bonds) a boost. This happened because Summers was seen as more likely to dial back the accommodation whereas the remaining frontrunner Janet Yellen is seen more like Bernanke. Fears of decreased accommodation under Summers have perhaps been a slight drag on prices of Stocks and Bonds. When bond prices fall, rates rise.
- Massachusetts Mortgage rates moved slightly lower this afternoon after beginning the day in line with yesterday's worst levels of the year. Things looked relatively bleak as domestic market participants were greeted with flat trading levels vs Wednesday's late day weakness and stronger economic data in the morning that, at first, threatened to take rates even higher. But bond markets, including MBS (the mortgage-backed-securities that most directly affect mortgage rates) were able to hold their ground long enough to make it to the 1pm 30yr Treasury Auction, which helped rates move lower into the afternoon. Best-Execution for 30yr Fixed, Conventional loans remains at 3.625%, with ongoing stratification between lenders due to recent volatility.
Mortgage rates began the day much improved
compared to Monday's latest offerings, but the gains mostly evaporated by the end of the session. The mortgage-backed-securities (MBS) that most directly affect rates, had been steadily improving since sustaining major damage from Friday through Monday morning. Those improvements carried through to this morning's rate sheet print times, but trading levels began to deteriorate shortly thereafter. Stock prices and Treasury yields rose. MBS fell (falling prices mean rising rates), and throughout the course of the day, most lenders recalled rate sheets for negative reprices. The result is a 30yr Fixed Best-Execution level that remains at 3.625% with a few lenders still marginally lower in costs vs yesterday.
There are only 10 calendar days remaining in the Fed's MBS Purchase Program, as it is scheduled to end on March 31st. What does this mean for interest rates?
The program was implemented in January 2009 to help add some liquidity to the secondary lending market. The goal of the program was to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. At the time, mortgage lending was risky and investers were hesitant to buy mortgage backed securities (MBS) and hold them in their portfolios. The Fed stepped in and agreed to buy/back $1.250 trillion of MBS, under the supervision of the FOMC. As a result, the secondary market received a much needed boost from the Fed and the refi-boom was again in full force as interest rates hit historical lows.
What happens now? Well, many investors and analysts are predicting that interest rates will start to trend upwards after the 31st, as anxiety will hit the marketplace. Interest rates are not expected to sky rocket, but some analyst have forecasted rates to hit 5.500% by early May 2010.
In the meantime, 30YR fixed interest rates remian at 4.875% to start the week of March 22, 2010. We at HomeQuest urge anyone seeking home financing needs to act now, while the interest rates remain at historical lows.