Mortgage Rates: Volatility Strikes Back!

Interest Rates

As folks returned from holidays overseas and got their power turned back on
after Irene, participation picked up in the markets and Mortgage
improved yesterday, basically right back to Friday afternoon’s

But our old friend “volatility”
brought rates right back up to Monday’s levels!  Arghgh! 
What to do?!  Fortunately, we told
you what to do yesterday,
when we said the “ongoing guidance from recent posts is back in full effect.”  So hopefully, you’re locked up, and if not,
read the “guidance” section below.

CURRENT MARKET*: The BestExecution 30-year fixed mortgage rate
has moved BACK UP to 4.25% and in some cases 4.375%. Several lenders are
willing to offer lower rates, but those quotes carry with them additional
closing costs.  On FHA/VA 30 year fixed BestExecution moved BACK UP
to 4.25%.  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
3.625%. Five year ARMs are still best priced at 3.250%. ARMs seem to have
bottomed out. 

A note on the greater-than-normal variation in rate offerings between
lenders.  There is an increased amount of variety in what individual
lenders are now quoting as their BestExecution rates.  This is a
factor of price volatility in the secondary mortgage
 Unfortunately when volatility picks up in the secondary
mortgage market, the cost of doing business gets more expensive for lenders
(hedging costs go up). Those added costs are usually passed down to consumers
via extra margin in rate sheets.  Additionally, the recent rates rally
makes lenders busy enough that some control their inbound volume by raising
rates regardless of the secondary mortgage market in order to discourage new

GUIDANCE: This has been quite a little 4 day whipsaw of volatility
for mortgage rates.  Rarely have we moved
so rapidly up and down between BestExecution rates.  Last time we were at these levels, we noted
there might be some opportunity for a strategic float, but we felt safer about
that at the beginning of the week than we do today with only one more session
to go before Friday’s NFP.  But that’s
the extent of the warning.  We don’t feel
downright opposed to waiting and seeing what tomorrow holds, just that we’re “less
sure” that tomorrow will see rates bounce back. 
In general, locking in here still makes lots of sense for lots of
scenarios considering our overall nearness to all-time lows and the fact that
it’s more frustrating to miss out on a refi opportunity in the low 4’s
altogether than to miss out on an opportunity in the high 3’s but still lock in
the low 4’s.  Friday remains high risk owing the the Employment
Situation Report,
so if you’re not locked up by Thursday, you’re at the
whim of Friday’s jobs data which could take rates either direction. 

Refi Roadmap: A Locked Rate Isn’t a Closed Loan
must read


*Best Execution is the most cost efficient combination of note
rate offered and points paid at closing. This note rate is determined based on
the time it takes to recover the points you paid at closing (discount) vs. the
monthly savings of permanently buying down your mortgage rate by
0.125%. When deciding on whether or not to pay points, the borrower must
have an idea of how long they intend to keep their mortgage. For more info, ask
you originator to explain the findings of their “breakeven analysis” on
your permanent rate buy down costs.

*Important Mortgage Rate Disclaimer: The Best Execution loan pricing
quotes shared above are generally seen as the more aggressive side of the
primary mortgage market. Loan originators will only be able to offer these
rates on conforming loan amounts to very well-qualified borrowers who have a
middle FICO score over 740 and enough equity in their home to qualify for a
refinance or a large enough savings to cover their down payment and closing
costs. If the terms of your loan trigger any risk-based loan level pricing
adjustments (LLPAs), your rate quote will be higher. If you do not fall into
the “perfect borrower” category, make sure you ask your loan
originator for an explanation of the characteristics that make your loan more
expensive.”No point” loan doesn’t mean “no cost” loan. The
best 30year fixed conventional/FHA/VA mortgage rates still include closing
costs such as: third party fees + title charges + transfer and recording. Don’t
forget the fiscal frisking that comes along with the underwriting process

CAUTION: MND guidance is speculative in nature. We don’t have a
crystal ball, we can’t predict the future, we can only share our outlook.
Making the following considerations extra important……………………

What MUST be considered BEFORE one thinks about capitalizing on a rates rally?

   1. WHAT DO YOU NEED? Rates might not rally as much as you
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough


Leave a Reply