Mortgage Rates: One Last Chance to Remove FOMC Risk

Interest Rates

Some overnight news out of Europe did a small amount of damage to bond
markets earlier this morning and based on market levels, Mortgage
were just barely weaker than yesterday.  But the damage was seen only in terms of
COSTS and not in the actual INTEREST RATES that you’d see on your Good Faith
Estimate.  (see “Current
Market” for more details).

This is basically a “gimme” ahead of tomorrow’s high-risk event the FOMC Announcement (AKA “Fed Rate Decision.”  Although nothing will change in terms of the Fed’s rates, markets are waiting to hear how the Fed treats the topics of additional purchases in the bond markets).

CURRENT MARKET The BestExecution 30-year fixed mortgage rate
is BACK at 4.125% after having been between there and 4.25%. 
Several lenders are willing to offer lower rates, but in most cases,
those quotes carry additional closing costs.  On FHA/VA 30 year fixed BestExecution
 is straddling  3.875% and 3.75% (no change).  Deals
can be structured with lower rates, but again, you’ll pay more for those, so
make sure you assess the time it takes to break-even on the extra
expense.  15 year fixed conventional loans are best priced at 3.375% (no
change). Five year ARMs are best priced at 3.125% (no change).  Please
note there can be a fair amount of variety between lenders and that this has
been exaggerated by recent market volatility.

GUIDANCE: It seems like the mortgage market is sending a clear
 Yesterday’s rates were solidly lower than Friday’s, but the
secondary mortgage market has rallied about as much as we’ve seen it rally
lately.  Combine this phenomenon of “running out of steam” with
the upcoming high risk event of Tomorrow’s FOMC (sprinkle in the fact that the
rally iself is driven by overseas headlines, and those continue to create a
risk of unexpected movements in the short term) and it seems like all the stars
are aligning to suggest locking this afternoon is the highest probability
 All that notwithstanding,  we continue to favor locking due
to the nearness to all-time lows.  Floating into the FOMC announcement is
like rolling the dice on the market’s reaction to it.  Until we see proof that the Secondary
Mortgage Market can break higher than it’s recent highs, we’re hesitant to
outright PLAN on it happening.


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