Mortgage Rates Barely Budge Despite Govt. Shutdown
Oct 1 2013, 5:05PM
Mortgage rates were flat to slightly higher today,depending on the lender. Overall, rates are still very close to their best levels since June 19th with Friday being the only noticeably better day for a few lenders. It's worth noting that more than a few lenders are in no worse shape than they were on Friday. The movement has been quite modest. Conforming 30yr Fixed rates remain most efficient (best-execution) at 4.25% though some lenders have attractive buydowns to 4.125% while others remain at 4.375%.
The modest movement be somewhat counterintuitive given the clamor of recent headline events and theseemingly dire implications for the the economy. One explanation is that financial markets often begin moving in the direction implied by the outcome against which they're defending. That's a pretty confusing sentence, so let's just say this: markets had been guarding against a shutdown by moving lower in rate. In that sense, if the shutdown was avoided, we may well have seen rates move higher more quickly today. The actual movement was small enough that it doesn't insist on being scrutinized.
The other explanation--and one that works by itself or in conjunction with the previous thought--is that markets care far less about political drama than they do about things like this week's big employment data. In fact, the biggest piece of employment data may now be delayed due to the shutdown, leaving financial markets to figuratively ask "what now?" It's as if we were all dressed up with nowhere to go today, and thus simply drifted with a breeze that happened to be toward slightly higher rates.
We may be able to confirm the extent to which markets are eying employment data tomorrow morning as we will get the ADP Employment Report. This one isn't produced by the government and thus won't be subject to a delay. It's designed to track the government report in terms of its movement and even on normal weeks can cause quite a stir if it suggests a surprise is on the way when the official report is normally released 2 days later. The fact that the official report may not be following this week could place extra emphasis on ADP's numbers. Weaker-than-expected employment may help rates stay or move lower, while stronger-than-expected numbers could continue applying upward pressure.
Loan Originator Perspectives
"Govt. shutdown forces thousands to flee from their homes!! Dogs living with cats!! Zombies attacking kids at local playgrounds!! Well, not exactly. In fact, rates remain fairly unscathed at this point. Though there is an upward bias. May be some bumps in the road as IRS and SSA have limited services, which will affect the mortgage process. If you are being offered a rate that is attractive to you take it. You can't lose by being able to sleep at night." -Bob Van Gilder, Finance One Mortgage
"We're drifting higher on rates today, and while current ranges haven't been broken, it may be time for floating borrowers to lock in pricing. Surprising that the government shutdown has helped equities but not MBS, conventional wisdom was that stocks would suffer. Borrowers with FHA and USDA loans in process should contact their lender to discuss the shutdown's potential effect on their loans." -Ted Rood, Senior Originator, Wintrust Mortgage
Today's Best-Execution Rates
Ongoing Lock/Float Considerations
The modest movement be somewhat counterintuitive given the clamor of recent headline events and theseemingly dire implications for the the economy. One explanation is that financial markets often begin moving in the direction implied by the outcome against which they're defending. That's a pretty confusing sentence, so let's just say this: markets had been guarding against a shutdown by moving lower in rate. In that sense, if the shutdown was avoided, we may well have seen rates move higher more quickly today. The actual movement was small enough that it doesn't insist on being scrutinized.
The other explanation--and one that works by itself or in conjunction with the previous thought--is that markets care far less about political drama than they do about things like this week's big employment data. In fact, the biggest piece of employment data may now be delayed due to the shutdown, leaving financial markets to figuratively ask "what now?" It's as if we were all dressed up with nowhere to go today, and thus simply drifted with a breeze that happened to be toward slightly higher rates.
We may be able to confirm the extent to which markets are eying employment data tomorrow morning as we will get the ADP Employment Report. This one isn't produced by the government and thus won't be subject to a delay. It's designed to track the government report in terms of its movement and even on normal weeks can cause quite a stir if it suggests a surprise is on the way when the official report is normally released 2 days later. The fact that the official report may not be following this week could place extra emphasis on ADP's numbers. Weaker-than-expected employment may help rates stay or move lower, while stronger-than-expected numbers could continue applying upward pressure.
Loan Originator Perspectives
"Govt. shutdown forces thousands to flee from their homes!! Dogs living with cats!! Zombies attacking kids at local playgrounds!! Well, not exactly. In fact, rates remain fairly unscathed at this point. Though there is an upward bias. May be some bumps in the road as IRS and SSA have limited services, which will affect the mortgage process. If you are being offered a rate that is attractive to you take it. You can't lose by being able to sleep at night." -Bob Van Gilder, Finance One Mortgage
"We're drifting higher on rates today, and while current ranges haven't been broken, it may be time for floating borrowers to lock in pricing. Surprising that the government shutdown has helped equities but not MBS, conventional wisdom was that stocks would suffer. Borrowers with FHA and USDA loans in process should contact their lender to discuss the shutdown's potential effect on their loans." -Ted Rood, Senior Originator, Wintrust Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.25%
- FHA/VA - 4.0-4.25%
- 15 YEAR FIXED - 3.375-3.5%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
- Expectations for "tapering" (a reduction in "QE3" asset purchases) mounted over the summer and September 18th was seen as the most likely day for a potential tapering announcement
- But the Fed decided to keep a change in QE amounts on hold until the economy could more convincingly show that rising rates (which had been rising because markets expected the Fed to taper!) wouldn't be too big an impediment to further improvement.
- That's resulted in the first meaningful "pause" in the "rising rate environment" since it began in earnest in May, 2013. This won't necessarily be an ongoing move in the other direction, and we're nowhere near May's rates yet, but it's a good opportunity to get back in the market if rising rates pushed you out sometime between now and then.
- The extent to which that remains true relies on incoming economic data. Strong data will increase the speculation that the next Fed meeting will contain a reduction in purchases
- (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario. There are many reasons a quoted rate may differ from 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). Matthew Graham
Who is affected by the government shutdown?
At the Dane County Housing Authority, which gets federal funding to run its rental assistance program, Executive Director Rob Dicke said the agency was able to make its October payments to participating landlords. The program covers roughly 1,000 low-income families, or about 3,500 people, who get Section 8 vouchers to pay 70 percent of their monthly rent payments through the program.
As it is, October’s rents were made with only a partial payment of $446,000 from the federal Housing and Urban Development, about $100,000 short of what the county owed to landlords for the month, Dicke said. The housing authority used reserve funds to make up the difference this time, but there’s no money to do that again in November, he said. Read more:
One of the biggest questions regarding the shutdown and how it will affect housing has revolved around the mortgage market, specifically prospective buyers’ access to new home loans. After all, more than 90% of all loan activity is underwritten, insured, or owned by the government and its affiliated entities.
One of the biggest questions regarding the shutdown and how it will affect housing has revolved around the mortgage market, specifically prospective buyers’ access to new home loans. After all, more than 90% of all loan activity is underwritten, insured, or owned by the government and its affiliated entities.
Where there has been mounting concern is the Federal Housing Administration, which currently endorses about 15% of the entire single-family mortgage market. One government lender that will indeed suspend its home loan activity, however, is the Department of Agriculture.
Home lending aside, many economists and real estate experts are keeping a close watch on how Americans will react to this shutdown. “Administratively everything should keep moving along, but it’s more about the confidence of consumers and whether they perceive that the government shutdown could lead to a recession,” says Lawrence Yun, chief economist at the National Association of Realtors. More
"This is going to be very disruptive to the mortgage industry and pretty much result in a freeze of the pipeline," If the IRS is closed, it will not process any forms, including tax return transcripts, so the loan applications will be stalled. "Rates may go up this week if...Friday's job's report stays on the schedule," said Matthew Graham of Mortgage News Daily. "Markets would have to defend against the possibility of a strong report reigniting October taper expectations." More
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Sacramento Mobile Notary Public Signing Agent - Apostille Service- California Mobile Notary Network
Sacramento Mobile Notary Public Signing Agent - Apostille Service- California Mobile Notary Network
Other Government Shutdown funny notes.
"If the government does shut down, nonessential White House employees will be sent home without pay. So more bad news for Joe Biden."
-- "Since 1976, there have been 17 government shutdowns. The longest was during the four years that Jimmy Carter was president."
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"If they don’t or didn't reach a compromise tonight -- the budget won’t be passed and a partial shutdown will go into effect. Which I hope means I won’t get any more parking tickets."
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