Mortgage Rates: Best Execution Back to 4.875%


Home loan borrowing costs moved  lower today, bringing the
Best-Execution conventional 30 year fixed mortgage rate back down to 4.875%. 

Take a look at
our most recent chart of the average origination costs tied to specific
interest rate quotes (based on the offers from the five major mortgage lenders).  If the note rate line is moving up, the closing costs associated with that
note rate are rising. As you can see, consumer borrowing costs shot higher last week before reversing course this week.

Each line represents a different 30 year fixed mortgage note rate. 
The numbers on the right vertical axis are the origination closing costs, as a
percentage of your loan amount, that a borrower would be required to pay in
order to close on that note rate. If the note rate graph line is below the
0.00% marker, the consumer may potentially receive closing cost help from their
lender in the form of a lender credits. If the note rate line is above the
0.00% marker, the consumer should expect to pay additional points at the
closing table to cover permanent buydown costs and origination fees.

Execution” conventional 30-year fixed mortgage rate has fallen back to 4.875%. If you are looking to move down to 4.75%, this offer carries higher closing
costs but could be worth it to applicants who plan on keeping their new
mortgage outstanding for longer than the next 10 years.  Ask your loan
officer to run a break-even analysis on any origination points they might
require to cover permanent float down fees. On FHA/VA 30 year fixed “Best
Execution” is still 4.75%.  15 year fixed conventional loans are
best priced at 4.25%. Five year ARMS are still stratified and there is more
variation in what will be “Best-Execution” depending on your
individual scenario. 

PREVIOUS GUIDANCE:  Yesterday’s strength was encouraging but
could still prove to be a minor correction within the broader bearish trend. It
could also turn out to be a legitimate reversal leading conventional 30-year
fixed Best-Execution rates back to their recent perch at 4.875%. We’re in wait
and see mode….  The ceiling we hit today could be made of glass or
concrete.  As feared, it looks like markets have taken the entire week to
decide which direction to push rates next.  With Best-Execution rates
improved from their recent highs, it’s a good time for anyone who can’t afford
the risk of higher rates to favor locking.  But much like yesterday, those
willing and able to take a speculative risk for further improvements cannot be
automatically labelled as “crazy” given recent gains. And thank your
lender for absorbing today’s price weakness when they should have increased
borrowing costs! (COMPETITIVE MARKET!)

CURRENT GUIDANCE:  We don’t know
how long this rally will last, but are more open to floating than we have been
recently.  Naturally, if you can’t afford
to have closing costs rise or in the worst case scenario, have your rate move
higher, then this won’t apply to you. Moving below 4.875% will require a sustained bond market rally though.  If you do not have time to wait for this scenario to play out, you should lock now as 4.875% will likely be as good as it gets in the meantime.

IMPORTANT PERSPECTIVE: Reassuring Rates Rally Gives Pause to Bearish Bias

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

   1. WHAT DO YOU NEED? Rates might not recover as much as you
   2. WHEN DO YOU NEED IT BY? Rates might not recover as fast as you
the bond market?


“Best Execution” is the most 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 30 year fixed conventional/FHA/VA mortgage rates still include closing
costs such as: third party fees + title charges + transfer and recording. Don’t
forget the intense fiscal frisking that comes along with the underwriting

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