Mortgage Rates Inch To New 7 Month Highs
Feb 20 2013, 4:53PM

Mortgage rates avoided the larger-scale swings that they might have considering the important data on tap today. Instead, they merely began the day just barely into their worst levels in about 7 months (depends on the lender, some are improved, others unchanged) and, for the most part, stayed right there despite a good bit of volatility surrounding today's big new. While many lenders are still at 3.625% in terms of Best-Execution for 30yr Fixed, Conventional Loans, 3.75% is increasingly prevalent.

(What is A Best-Execution Mortgage Rate?)

Today's big-ticket event was the release of the Minutes from the most recent Fed meeting. Markets already had the official statement produced by that meeting as of January 30th, but the Minutes offer more granular details on the undercurrents that could affect policy in the coming months. Of particular interest to the mortgage market are the conditions under which the Fed's MBS buying program will continue.

MBS are the "mortgage-backed-securities" that most directly influence mortgage rates. Despite a moderate amount of controversy surrounding the creation of new money in order to buy MBS, the so-called QE3 (shorthand for the third round of the Fed's quantitative easing measures) has had an unquestionable benefit for mortgage rates, ushering them to their all-time lows shortly after the announcement of the program. Because rates are driven by MBS, and because Fed policy plays a pivotal role in MBS markets, nailing down current and future probabilities surrounding Fed MBS buying is a critical component in determining how rates will move.

Markets were heading into today's Minutes release prepared for new information regarding a gradual shift in the Fed's stance. Such a shift--some would argue--was alluded to in the previous iteration of Fed Minutes that introduced the notion that quantitative easing wasn't quite as unanimous as previously conveyed and that it might not last as long as previously assumed. While this didn't change any expectations about the near-term plans at the Fed, it did get markets thinking about what an eventual exit might look like.

At the end of the day, we didn't end up getting any new and shocking information, but neither did we encounter reason for rates to stampede back in the other direction. Considering that MBS markets ended up in slightly positive territory, the day was strangely unsatisfying. Lenders were in defensive stances heading into the afternoon news, not to mention that MBS were weaker in the morning.

What most mortgage rate watchers are left with are rates that were slightly higher out of the gate and no changes in the afternoon. That said, some of the more conservatively priced lenders did release new and improved rate sheets late in the day, but they amounted to mere tokens. In the big picture, rates are mostly as high as they've been since Summer 2012.