Mortgage rates shot higher today at their fastest pace of the year today after Fed forecasts suggested members saw the Fed Funds Rate rising sooner and by more than expected.  To be very clear, the Fed Funds Rate is NOT directly tied to mortgage rates, but it can often be the case that expectations of a hike coincide with with mortgage rates moving higher as well.  

That was indeed the case today, and the problem was compounded by the fact that markets were surprised by the changes in the forecast.  Instead, the focus had been on how the Fed might evolve the language in its policy statement.  That language did change, but it wasn't outside market expectations by any means.

The surprise in the forecast had to do with 6 Fed members who had previously predicted rates staying the lowest among their peers.  Those 6 members all adjusted their forecasts higher by .25 on average for where they see the Fed Funds Rate at the end of 2015.  There was also a shift in the number of voters preferring a rate hike in 2015 (+1)  vs 2016 (-1). 

Taken together, this was enough of a surprise for financial markets to react somewhat severely in the context of the recent narrow range (it's not severe compared to 2013-style volatility or the bigger picture range in 2014).  Adjusted for changes in closing costs, rates rose an equivalent of 0.10% today for most lenders.  That takes 4.375% out of the running as a prevalently quoted conforming 30yr Fixed rate for the best-qualified borrowers (best-execution) and leaves that honor solely in the hands of 4.5%.

Loan Originator Perspectives

"Interesting how Fed Statements can greatly influence mortgage rates, even when their verbiage is similar to past statements. Today was a great example as rates soared when markets deduced that the Fed Funds Rate may rise sooner than previously expected. 21 price worsens were reported on MBS Live, and some lenders repriced worse more than once. The damage is done now, we'll see if some Ukraine Drama can help us recoup today's losses." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage

"Following the FOMC statement and Yellen's press conference, rates got hammered as she indicated a rate hike might come sooner than many suspected. Hopefully, you locked in prior to the statement. If not, I would roll the dice and float over night to see if we get some kind of bounce back. The damage appears far worse than the statement or press conference warranted." -Victor Burek, Open Mortgage

"Well locking yesterday or at least before 2pm today was certainly a good call. Market reaction to today’s Fed meeting is driving higher rates in the MBS and bond markets. Talk of short term rate hikes possibly in early 2015 is not helping at all. Weak employment growth after the winter weather excuse wears off could cause rates dip but that remains to be seen." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.

"Might as well wait and see what tomorrow brings. There is a very real chance that this sell off just took us to the high end of the range and we start moving back down over the next few days. If you do float, be ready to lock because any more selling from here means there is much further up to go." -Brent Borcherding, Capital M Lending

"Relieved by the absence of bloodshed on Ukrainian soil, the market was struck in the chest from the shot fired by the Fed. Mother Russia may be lurking, but it is Janet that carries the briefcase with the nuclear codes. Much like QE last fall, the destination of this train has been clearly stated--it is merely a matter of time and a few rolling hills before it's arrival. Dips in the market will always be present, but we ultimately know that rates can't sustain at their current levels--not if it's up to the Fed." -Brandon Blue, Licensed CA Broker, BlueHomeLoans.com

Today's Best-Execution Rates

• 30YR FIXED - 4.5%
  
• FHA/VA - 4.00%
  
• 15 YEAR FIXED -  3.5%
  
• 5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

• The Fed has stayed the course on their $10bln per meeting reduction in bond buying, though markets have handled it relatively calmly compared to the days of "coming to terms with tapering" in 2013.  
• Rates fell significantly in January, leveled-off in February and have been taking choppy steps higher in March
  
• Some mitigating factors had kept rates from moving too far out of a narrow range, including the uncertain impact of weather on recent economic data as well as geopolitical risk surrounding Ukraine
  
• As soon as investors can have more confidence that the incoming data is an accurate representation of economic conditions, we should see more willingness for rates to react accordingly, with weaker data helping keep rates lower and stronger data pushing them back toward January's highs.
• That confidence is increasing in March with a strong jobs report and more aggressive forecasts on rate hikes from the Fed.  Ukraine has offset that somewhat, but the general trend continues to be toward higher 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).