Mortgage rates edged modestly higher for a second straight day, though they're still in a lower range than most of December and early January.  The movement was small enough as to only effect the closing costs associated with yesterday's rates. 4.5% remains the most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution).  When adjusted for day to day changes in closing costs, rates rose an equivalent of 0.02% today.

Although rates have managed to stay in this newer, lower range for the past two weeks, they'll soon come to a crossroads, if they're not there already.  The decision to move higher or lower from here is most likely to be informed by next week's FOMC Announcement.  That will be the Fed's chance to either stay on the same path with respect to reducing it's bond buying (which benefits rates), or to pay some mind to the last jobs report, either by slowing down the pace of tapering or holding off altogether for one cycle.

If they don't take one of those softer approaches, this low range of rates may well end up being a floor indefinitely.  The fact that we haven't been able to move any lower than Friday's levels on 2 occasions now, suggests that the very welcome move lower in mid January has run its course and will now rely on the next big event if it's going to make any further progress.

While the fact that the 'big event' doesn't happen until next Wednesday should serve to limit bigger swings, it's not uncommon for rates to start sliding in one direction or the other even before the event.  With the longer-term trend still pointing toward higher rates, this recent rebellion has the burden of proof.  Because of that and because of the resistance we've seen at Friday's lows, the decision to lock or float ahead of next Wednesday's FOMC may as well be made now. 

Loan Originator Perspectives

"Looks like we may have seen the best rates of the week yesterday as pricing worsened despite no significant data today. Without economic or geopolitical motivation to improve, rates have little reason to halt their 8 month march higher. Further Fed tapering expectations for next week's meeting don't help either. Locking at application probably the best course of action for all but the most risk oriented borrowers." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage

"Looking increasingly likely to lock asap. Negative re-prices rolling in during the afternoon. Floating in my opinion is for those who want to get a higher rate prior to closing than they can get now. Which means you do not want to float." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc. NMLS # 107434

Today's Best-Execution Rates

• 30YR FIXED - 4.5%
  
• FHA/VA - 4.25%
  
• 15 YEAR FIXED -  3.5%
  
• 5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

• The prospect of the Fed reducing its asset purchases weighed heavy on interest rates for the 2nd half of 2013, causing volatility and generally pervasive upward movement.
  
• Tapering ultimately happened on December 18th, 2013.  Markets had done so much to come to terms with it ahead of time that it essentially just confirmed the the 6 month move higher in rates, but didn't make for another immediate spike higher.
• That said, we should assume that we're still in a rising rate environment on average with scattered pockets of recovery providing clear opportunities to lock.  
• The exceptionally weak employment data on January 10th provided on of these "pockets of recovery."  There are two ways to approach these.  More risk tolerant: set a line in the sand just slightly higher in cost than your current quote.  In other words, this could be either the next .125% higher in rate or simply a few hundred dollars more in closing costs.  Then commit to lock when your quote crosses above that line in the sand.  Less risk tolerant: lock on the day of or day after any significant move lower in rates.
• (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).