Mortgage Rates Soar To Multi-Month Highs Following Fed Minutes

Mortgage Rates Soar To Multi-Month Highs Following Fed Minutes


Jan 3 2013, 5:05PM

Mortgage rates soared to their highest levels in months today after Minutes from the Fed’s most recent policy meeting showed the board to be more divided concerning the continuation of its most recent round of quantitative easing, dubbed QE4.  It’s not that markets think that The Fed’s purchases of MBS (the "mortgage backed securities" that most directly influence mortgage rates) or Treasuries will be stopping any time soon, but however long a particular market participant thought that QE would continue, that time frame was either shortened or called into question after today’s data.  

That led to major selling pressure in bond markets, including MBS.  It’s as if MBS got a call from their rich uncle saying "hey there sport…  Um, yeah….  about those checks I’ve been sending you… you know, the ones you count on to subsidize your fast-paced lifestyle?  Yeah… just a heads up that I’m not super sure that I’ll be able to send those for the whole year… just wanted to let you know because I know you were kinda maybe planning on that being an ‘all-year’ sorta thing.  Well, it’s been a good talk!  Gotta go!"

30yr Fixed Best-Execution–after having been firmly planted at 3.375%–has risen to 3.5% at several lenders, however, lower rates are still available.  They’re just going to cost a lot more today than they did yesterday.

The show’s not over either!  Tomorrow morning brings the all-important Employment Situation Report.  This is always the single most important piece of economic data each month.  While we’d recently wondered if its traditional impact would be lessened by the focus on the Fiscal Cliff deal reaction, it’s now looking to be just as important as ever considering that employment metrics are a lynchpin for Fed policy changes (and markets clearly showed us today how very interested they are in Fed policy changes).  

After feeling like we just dodged a Fiscal Cliff bullet yesterday, today’s losses come a serious blindside to anyone who’d floated a rate with more optimism.  If tomorrow’s jobs data is much stronger than expected, the pain will only continue. 

Today’s Best-Execution Rates

  • 30YR FIXED – 3.375 – 3.5%
  • FHA/VA – 3.25% (varies more between lenders than conventional 30yr Fixed)
  • 15 YEAR FIXED –  2.875% – 2.75%
  • 5 YEAR ARMS –  2.625-3.25% depending on the lender

Ongoing Lock/Float Considerations

  • Rates and costs continue to operate near all time best levels, but uncertainty surrounding the Fiscal Cliff is applying upward pressure.
  • Rates could easily move higher or lower, but given the nearness to all time lows, there’s generally more risk than reward regarding floating
  • This will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn’t always mean they’re done improving.
  • (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario.  There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you’re following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).

Contact us today:  Ben Coulter  |  612.384.7818  |