After being stuck in the same spot for over a month, home loan borrowing costs shot higher last Wednesday at their most violent pace since early February. The release of stored energy led to a spike in Best-Execution mortgage rates.
Check out this chart: VISUALIZING THE SPIKE
CURRENT MARKET: The “Best Execution” conventional 30-year
fixed mortgage rate has risen to 5.125% after spending an extended period stuck
at 4.875%. For those looking to permanently buy down their rate to 5.00%,
this quote carries higher closing costs but the upfront fee to
permanently buy down your rate to 5.00% is worth it to applicants who
plan to keep their new mortgage outstanding for longer than the next 5
years. Ask your loan officer to run a breakeven 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 now best priced at 4.25%. Five year ARMS are
stratified and there is more variation in what will be
“Best-Execution” depending on your scenario. We recommend
break-even-analysis for several potential rates.
VERY IMPORTANT CAVEAT: Mortgage rates are being quoted in a wider
range right now due to recent regulatory changes in Loan Officer Compensation
policies. Because of this, the Best-Execution mortgage rate can vary greatly
from lender-to-lender. The quotes we have listed above are on the more
aggressive side of the primary mortgage market.
PREVIOUS GUIDANCE: Current guidance will be simple until current trends
change. Plain and simple: after being stuck in the same spot for several
weeks, mortgage rates have finally made a directional move. Unfortunately that
direction wasn’t consumer friendly. We’d be in lock mode until rates aren’t
rising any more, or at least until rates so some motivation to stop
rising. We’ll let you know when we feel it’s safe to confirm that, but
until then, take the lock bias we’ve been favoring for the past month and
double its intensity.
CURRENT GUIDANCE: The week ahead is busy. Here’s our full write up… While we do see a glimmer of opportunity for
recent trends in rates to moderate, that would rely on an almost perfect
alignment of the heavens in terms of economic data, corporate earnings, and
Treasury auctions. Thus, the same
guidance remains in place until such a thing happens. Plain and simple: We’d be in lock mode until
rates aren’t rising any more, or at least until rates show some motivation to
stop rising. We’ll let you know when we feel it’s safe to confirm that.
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
3. HOW DO YOU HANDLE STRESS? Are you ready for MORE VOLATILITY in
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 buydown 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