Mortgage rates drifted just slightly higher today amid extra quiet trading conditions. Bond markets (which include the mortgage-backed-securities that dictate mortgage rates) close early today and are fully closed tomorrow for the New Years holiday. Banks and mortgage lenders will also be closed, but almost all will be open on Friday. Keep in mind that when banks are closed, lenders dont release new rate sheets and mortgages cant be locked. As for todays movement, it does little to change the bigger picture. Top tier scenarios are still easily in the high 3s with 3.875% being the most prevalently-quoted conforming 30yr fixed. Thats unchanged from yesterday. Because of that higher rates refers to the modestly higher closing costs associated with prevailing rates. In other words, the NOTE rate would be the same and the EFFECTIVE rate is microscopically higher. Expressed in terms of effective rate, the increase is 0.01%. This leaves todays rates among the lowest of 2014, which is quite a feat considering the widespread consensus for higher rates this year. As it happened, markets did a great job of pricing-in the end of the Feds asset purchases in 2013. Markets will always attempt to account for present and future information to whatever extent the future is known. With mid-2013 telegraphing the Feds tapering decision fairly clearly, markets acted on the information. By the time the Fed finally began the tapering process, that variable was removed from the equation and rates calmed down and drifted sideways until the next major source of inspiration showed up. For 2014, that would certainly be European growth/inflation/QE considerations. April and May marked a turning point where markets began to consider that Europe might be too big a drag for US rates. Until then, it was unclear if rates would resume their upward trend. Afterward, we clearly saw investors coming to terms with the fact that almost everyone was wrong about the path of rates in 2014, and weve simply been following the Eurodrama ever since. Whenever that eventually turns a corner, so too will mortgage rates--most likely. The fun thing about such a corner is that it will only be recognizable in hindsight. One things for sure though, with key European bond yields closing at a record low yesterday, were definitely not there yet. Heres a chart of US 10yr Treasury yields (the best indicator of broader bond market movement) and the daily effective mortgage rate figure that I painstakingly calculate with math and magic every day. The white line is the single most accurate representation of day to day movement in average conforming 30yr fixed mortgage rates anywhere. Happy New Year. The Mortgage News Daily
Posted on: Wed, 31 Dec 2014 19:43:26 +0000
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