February 20th, 2014 7:40 AM by Jackie A. Graves, President
Mortgage rates began the day moderately lower compared to yesterday's latest levels, but the improvements didn't last. Bond markets including MBS (the 'mortgage-backed-securities' that most directly affect rates) began losing ground mid-morning and the weakness picked up steam after the afternoon's release of Minutes from the late January Federal Open Market Committee meeting. This prompted most lenders to issue negative reprices. The net effect would be that a borrower who had been looking at slightly lower costs this morning is now back in line with Friday afternoon's offerings. In some cases, that could affect the interest rate itself, but most scenarios would simply be looking at higher closing costs (or a lower lender credit, if applicable).
4.375% remains the most prevalently quoted 30yr fixed rate for the very best borrower scenarios (best-execution) though the weakness means 4.5% isn't far off. That said, 4.25% isn't far off either, for borrowers inclined to "buy down" their rate. When adjusted for day to day changes in closing costs, rates rose an equivalent of 0.02% today.
While the discrepancy between morning and afternoon rate sheets was noticeable, there was no detectable drama today in terms of the end-of-day average rate. We fell 0.02% yesterday and rose by the same amount today. As such, today's movement doesn't offer much by way of clues as to current market motivation. We've seen two major moves so far this year--a bigger move toward lower rates during January and a smaller move back in the other direction through the middle of last week.
We've been waiting for the next cue ever since. Optimists could say that today's weakness clearly doesn't make a case for another move higher being underway, and that would be justified. Pessimists could say they were hoping that the past few days of strength signified the start of a more positive trend--one that's now potentially defeated by today's weakness. Reality is probably somewhere in between in that markets are genuinely confused about what to do next. Unfortunately, this confusion could persist until we have a chance to see how the economy is faring in the absence of any uncommonly cold/snowy winter weather.