Rates have come down nicely, and may break into the 3% range again, which could ignite the market. It may already be happening – I ran into four different bidding wars in the last week!
Mortgage rates continued flying their recent holding pattern just over 4 percent. Most lenders’ rate sheets were essentially unchanged compared to yesterday’s latest. Additionally, we never saw enough bond market movement during the course of the day to justify any mid-day changes. The most prevalent Conforming rate (at zero points) has been pinned to 4.125% with very little change in associated closing costs for a week now.
Because most lenders adjust rates in 1/8th (0.125%) increments, the next time the best-execution quote moves lower, 30yr fixed rates will be back at 4.0%. Some lenders are offering that now, but it’s not the norm, and may involve additional closing costs.
So is it possible that we’ll see a more broad-based move down into the high 3′s? In a word, yes, but caveats apply. The concept of a “holding pattern” is carefully chosen because rates are indeed circling the runway, waiting for permission to land.
That permission can only be granted by economic developments that are “negative enough.” Specifically, markets would need to see more evidence that the labor market is weak enough to unequivocally delay the Fed’s timeline for reducing its bond buying program–one major factor in lower rates overall.
The surest bets when it comes to such data are the once-a-month Employment Situation Reports, such as last Tuesday’s. Due to shutdown rescheduling, the next report is coming up next Friday! Even tomorrow, we’ll get several pieces of data that will help decide the fate of the “circling plane,” including the ADP Employment numbers which attempt to forecast next Friday’s numbers. The FOMC releases a policy announcement in the afternoon, and although traders agree we’re not likely to see any policy change that hurts rates, it could still make for an afternoon where rates are actually higher or lower than the past afternoons.