After 5 straight days of almost no change on average, mortgage rates finally made a move today.  Unfortunately, it wasn't in the direction that most would hope.  On a positive note, the deterioration was only seen in the "cost" side of the equation, meaning that you'd likely be quoted the same rate as yesterday afternoon, but with slightly higher closing costs (or lower lender credit, depending on your scenario).  As such the most prevalent Conforming 30yr fixed rate  (best-execution) remains at 4.125%.

Today's weakness was almost exclusively a factor of one surprisingly strong piece of economic data.  We often talk about the interplay between economic data and rates, focusing mainly on the important employment reports.  That's because the Employment Situation Report is by far and away the most reliable market mover for interest rates when it comes to economic reports.

Other reports can have an impact, but it's usually smaller and happens less consistently.  When it comes to the non-employment-related reports shaking up mortgage rates, it takes a big deviation from the market's forecast. 

In other words: data surveys are a fixture in financial markets.  For any major report there will always be 30-80 prominent economists officially registering their predictions for upcoming data.  When the data is released, if it's much stronger or weaker than the forecast, markets react accordingly.

In today's case, it was the Institute for Supply Management of Chicago with their monthly Purchasing Manager's Index (or "Chicago PMI" for short) that shook things up.  This is a survey of business conditions in the Chicago area, which has proven to be similar enough in composition and economic trends to the entire nation that it has become a well-regarded report. 

The problem for mortgage rates is that this well-regarded report moved a whole lot more than it normally does.  In fact, this was the biggest jump in over 30 years.  Until that point in the day, rates looked poised to drop a bit, but the stronger economic data caused bond markets to weaken, meaning prices fell and rates rose.

Loan Originator Perspectives

"Bit of a selloff today as Chicago PMI data was surprisingly strong. While still within recent ranges, borrower pricing is slightly worse for same rates as last few days. All eyes turning to next weeks October NFP report. Whether markets will discount its validity given the DC Drama remains to be seen." -Ted Rood, Senior Originator, Wintrust Mortgage

"What started as a very promising morning was quickly destroyed by a much better than expected Chicago PMI. Despite the surprising reports and the reprices to follow, rates are about the same as yesterday afternoon. As the day has progressed, we have regained much of the earlier losses, so I like floating overnight as lenders will be slow to pass along the improvements." -Victor Burek, Open Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 4.125%
  
• FHA/VA - 3.75-4.0%
  
• 15 YEAR FIXED -  3.25-3.375%
  
• 5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

• Uncertainty over the Fed's bond-buying plans and more recently over Fiscal Policy has been making for a tough interest rate environment.
• A lack of data due to the government shutdown caused rates to experience moments of paralysis while headlines suggesting the shutdown might/might-not end, as well as a seizing-up of short term funding markets caused unexpectedly high volatility--enough to be felt in longer term rates like mortgages.
• After a deal was reached to avoid going over the debt ceiling, funding markets thawed and rates returned to the same 'wait and see' range that existed before the Fiscal drama. 
  
• Markets continue to be most interested in economic data and its suggestions about the longer term trajectory of the economy.  This will shape expectations for Fed policy in the coming months, and thus inform the direction of interest rates.
• The stronger the data the more likely the Fed is seen as reducing asset purchases.  Rates would rise under this scenario, but the most recent FOMC Meeting (and more importantly, the Fed's decision to hold off on tapering) suggests that they'll attempt to keep the pace of rising rates moderate as long as inflation isn't adversely affected.  The delayed release of the September jobs numbers on October 22nd helps confirm that.
  
• (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).