Mortgage Rates: Even More Nuts!


We’ve used the word “nuts” in the past to describe extra volatile movements in the mortgage market, but today takes the cake.  Many market records were broken following
today’s Federal Reserve FOMC meeting. The net effect was positive for consumer borrowing costs…

CURRENT MARKET*: The BestExecution 30-year fixed mortgage rate is still
4.250%. More lenders are however willing to offer 4.00% and 4.125% is approaching BestExecution status.  On FHA/VA 30 year fixed BestExecution
is 4.00%. Few lenders are willing to quote 3.875% without extra closing
costs.  15 year fixed conventional loans are still best priced at 3.75%
and we’re still seeing aggressive quotes at 3.625%. Five year ARMs are still
best priced at 3.25. ARMs and 15 year quotes seem to have bottomed out. 

It’s important that we point out an
increased amount of variation in what individual lenders are quoting as their
BestExecution rates.  This is a factor of price volatility in the secondary
mortgage market
. 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.

GUIDANCE: We’ve realized a good portion of the rates rally we’d been
holding out for plus more.  But believe it or not, we’re still not at “all time
highs.”  There’s room for improvement in the primary mortgage market as lenders have no passed along gains to their fullest extent. This is a factor of extra volatility in bond markets. Mortgage rates DO NOT like volatility.  Relative to various market levels, rate sheets are
conservative yes, but there’s no telling when things will get better, and
sadly, always a chance that they won’t get better at all.  Incidentally,
we lean toward the possibility of them getting better, but the timing and
flexibility required to capitalize on that possibility makes floating a less
attractive choice for most scenarios right now, especially when what’s on the
table is already so much better than everything else 2011 has to offer and
fairly darn close to all time low rates. 

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


*BestExecution 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 BestExecution 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

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