By Mortgage News Daily
Mortgage Rates Saved by the Bell
Market Summary
Mortgage rates moved higher for the first four days of the week with Thursday's increase being the most abrupt. This was a defensive move ahead of Friday's important Employment Situation Report, accounting for the possibility of stronger data. The report was weaker-than-expected, and resulted in the week's first move lower in rates and at the best pace since July 11th.
After edging up to 4.625% briefly on Thursday, 30yr Fixed best-execution returned to 4.5% though paying points to move down to 4.25% may be an attractive option for borrowers planning on being in the loan for more than 5 years.
"Week over week, rates are only slightly higher than last Friday, but volatility returned in grand fashion starting Wednesday. There were multiple lender reprices throughout the week. A quote costing nothing in the morning may have ended up costing several thousand dollars by the end of the day. Unfortunately, the volatility didn't make a clear suggestion as to the next move higher or lower. On a positive note, rates didn't get trounced, but neither have we seen a break of the longer-term trend higher. "
-Matthew Graham, Chief Operating Officer, Mortgage News Daily
30 Year Fixed Rate Mortgage
Week in Review
Rates shown below are based on the 30 Year Fixed Rate Mortgage
Friday, July 26, 2013 : 4.44% (-0.04%)
Mortgage rates improved today, capitalizing on friendly market movements that arrived too late in yesterday's session to make it onto rate sheets in any meaningful way. While lenders may release 1-3 rate sheets each day, MBS ('mortgage-backed-securities') are constantly trading in the secondary market. It's operationally inefficient for lenders to release new rate sheets every time the underlying markets move, so there are periodic thresholds where "enough is enough" to change lockable rate offerings. While part of yesterday afternoon's positivity was sufficient for that to happen, lenders passed along more of it this morning after bond markets carried the gains through the overnight session.
Monday, July 29, 2013 : 4.47% (+0.03%)
Mortgage rates were slightly higher to begin a week that could end with much bigger swings. Today, however, was relatively tame with market conditions reflecting a certain calm before the storm of data that begins on Wednesday (includes GDP, ADP Employment data, and a Fed Announcement among other things). That data stands a good chance to impact prices of mortgage-backed-securities (MBS), which most directly influence mortgage rates. The volatility that could be in store is sufficient to cause rapid change to the prevailing best-execution rate of 4.5%, but today's weakness merely means slightly higher closing costs for the same rates quoted on Friday.
Tuesday, July 30, 2013 : 4.48% (+0.01%)
Mortgage rates were essentially unchanged today, with some lenders in marginally better shape while others were marginally worse. Some of this discrepancy can be accounted for by mid-day reprices where lenders republish rate sheets on occasions where the mortgage-backed-securities market moves far enough in one direction. Lenders reprice at different times and under different circumstances, meaning that some underlying market movements can be bad enough to motivate some, but not all, lenders to reprice.
The rest of the discrepancy is due to the fact that markets simply didn't move much in the first place. In other words, even without the reprices, some lenders were in better shape this morning while others were worse. For the most part, the differences are microscopic and the most prevalent 30yr Fixed quote for a top-tier scenario (best-execution) remains at 4.5%. Paying additional closing cost to move to 4.25% continues to make sense in some cases, but the amount of time required to break even (extra costs divided by monthly payment savings) is closer to 6 years in some cases compared to just under 5 years last week. This varies by lender, however.
Wednesday, July 31, 2013 : 4.48% (+0.00%)
Mortgage rates are deceptively unchanged here at the end of the trading day, but that was far from the case this morning. Rates were significantly higher earlier today rising from yesterday's levels at their fastest pace of the week after stronger-than-expected economic data. The Fed statement in the afternoon had the opposite and more than equally-sized effect. Many lenders are now in slightly better territory than they were at the end of the day yesterday. Conventional 30yr Fixed best-execution rates remain at 4.5 percent and paying points to move to 4.25% continues to be a viable option depending on the scenario and personal preference
Thursday, August 1, 2013 : 4.57% (+0.09%)
Mortgage rates rose abruptly today, moving highest levels since July 9th as financial markets prepare for tomorrow's important Employment Situation Report. These preparations refer to several underlying factors including the reaction to this morning's stronger-than-expected economic data as well as concern that similarly stronger data tomorrow could lead rates even higher. Today's move took 30yr Fixed best-execution to the upper edge of 4.5% with 4.625% very close. Tomorrow is an extraordinarily important day with the highest prospects for volatility since the last employment report caused the biggest one-day rise in rates of the past 10 years. It can go either way, depending on the data (which will be released well before any lenders release rate sheets for the day).
Friday, August 2, 2013 : 4.48% (-0.09%)
Mortgage rates fell sharply today, matching the pace of yesterday's abrupt move higher. By the end of the day most lenders were close to their best rates of the week. Whereas 30yr Fixed best-execution was near a move to 4.625% yesterday, it's well back into the 4.5% range today with buydowns to 4.25% once again making sense for some scenarios (meaning that a top-tier borrower not paying any discount points at 4.5% may find long term value in paying the points associated with moving the rate down to 4.25%).
Today's much-anticipated Employment Situation Report was tamer than expected, with fewer jobs created despite the drop in the unemployment rate. Job creation (or "payrolls") is actually a much more important metric than unemployment (U/E) as far as markets are concerned. Part of the reason for this is the nature of the U/E calculation in that it relies on survey data from the general public to determine the size of the labor force. If more people who previously counted themselves as unemployed say they're not looking for a job, the unemployment rate goes down even if those people don't find work.
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Joe D Wells
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