It's important to note that financial markets were not exactly back in the swing of things in terms of summer-time participation. It's easy to assume that markets are the sort of thing that are either "on" or "off," but people actually make a difference. During this time of year (and especially when there are holiday market closures or days with limited data), some of those people do what other people do and take time off. This has an effect on how markets function-- increasing volatility or distorting reality. These side effects are far from guaranteed, but market participants aren't yet sure what to make of today's bounce back in interest rates because markets simply weren't active enough to draw any conclusions.
It could be the case that we recover even more ground before Wednesday's main event: the Minutes from June's FOMC Meeting. It could also be the case that we're merely catching our breath before more wild rides higher. The point is that we can't know yet. Every time we experience a jarring move higher in rates, there's hope that it will be the last one for a while, but it continues to be the case that we have yet to see a definitive turn since early May. That said, if you'd told traders in the secondary mortgage market that we would embark on a massive sell-off the day before it began, and asked them where 30yr rates would likely find their best supportive ceilings, the two most common answers would likely have been 4.375% and 4.875%.
There is hope for some consolidation in this rate range, but it pays to keep the potential volatility in mind. Not even three months ago, you could think of changes in rates happening not to rates themselves, but simply to the costs associated with those rates. The day to day risks were minimal compared to today where the actual rate itself may be moving an eighth to a quarter of a percent at a time. The scope of possible movement higher or lower has widened.
Loan Originator Perspectives
"Today we were able to recover almost half of the losses in MBS from Friday's runaway selloff. But you couldn't tell from today's rate sheets. Mortgage rates will be slow to improve until some sense of stability is back in the market. I continue to advise all of my clients to lock their rate in to secure their terms. " -Kenneth Crute Branch Manager Prime Mortgage Lending Inc
"Took a new application today, and we'd lost over .25% in rate from last Wednesday, even with a moderate MBS improvement this AM. Today's gains are less than 1/2 of the ground we lost during Friday's historic selloff, but something is better than nothing. Hopefully we'd seen the worst of this debacle, but I wouldn't bet the farm on it." -Ted Rood, Senior Originator, Wintrust Mortgage
"For my customers that are out shopping for new homes, the only thing you can do is keep them posted of the volatility in the market, and let them know that rates could change at any time. Today has been a good day for rates, but as we've seen, we could see another sell off tomorrow! So if you have a customer that is out shopping at their max approval amount, I would be very careful with what they are looking at, and let them know they may qualify for that house on Monday, but not qualify on Tuesday! Communication will now be more important than ever." -Jason York, VP of VA Operations, Prime Mortgage Lending, Inc
"Locking last week before the Friday jobs report was a good call. I'm still locking as there appears to be no end to the rise in rates." -Mike Owens, Partner, Horizon Financial Inc.
Today's Best-Execution Rates
30YR FIXED - 4.75-4.875%
FHA/VA - 4.25% -4.75% (depending on lender buy-down structure)
15 YEAR FIXED - 3.875%
5 YEAR ARMS - 3.0-3.5% depending on the lender
source: Matthew Graham at mortgage daily news