Yesterday we wrote: “Until we see proof that the Secondary Mortgage Market
can break higher than its recent highs, we’re hesitant to outright PLAN on it
This is exactly what happened after today’s FOMC Announcement (aka “Fed Rate
Decision,” although the RATE isn’t important these days because it’s not moving
and not expected to move).
Markets had been expecting the Fed to commit to shifting their TREASURY
holdings to longer maturities (like selling 2-3yr notes and buying 10’s), and
indeed, that was announced today. 10 and
30yr Treasuries Rallied from already impressively low levels on the news.
But the Fed included a somewhat surprising nod to the Secondary Mortgage
Market in committing to reinvest the income it receives from monthly payments
and periodic pay-offs in its MBS portfolio BACK INTO MBS (aka “mortgage-backed-securities,”
the bonds that govern mortgage rates).
This caused a massive break of recent highs and pushed MBS well into all
time highs. Remember that the higher the MBS PRICE, the lower interest rates can potentially go. Although MBS are the most direct driver of mortgage rates, there are other factors at play. We explained that in greater
(Why aren’t rates getting lower as fast as Treasuries).
Today’s Rates: The current
market is in a state of flux at the moment and mortgage rates either already
have or are likely in the process of moving to ALL TIME LOWS. From 4.125% yesterday, BestExecution on a
30yr Fixed is closest to 3.875% this afternoon depending on the lender. In some cases it’s 4.0%. FHA/VA deals are in a bit of a predicament
that’s keeping them blocked off below 3.75% (there’s no secondary market for
rates any lower than that right now!). For
similar reasons, 15 year fixed conventional loans may be stuck at 3.25%, though
that’s still an improvement from yesterday.
The secondary market factors driving adjustable rate loans are in a
massive state of flux, but one that is mixed between positive and
negative. Shorter ARMS are generally the
same to slightly better whereas longer ARMS could actually be worse. Please
note there can be a fair amount of variety between lenders and that this has
been exaggerated by recent market volatility.
GUIDANCE: If you locked ahead of FOMC, although rates are lower
today, don’t second guess your decision.
A lot of folks made the same one, and it was definitely the safest
one. As we’ve said in the past, the
frustration that comes from locking NEAR all-time lows but missing out on an
eighth or two lower rate pales in comparison to missing out on a refi
opportunity altogether because rates moved higher too quickly to react. If you didn’t lock today, the same arguments
apply! Even though we think there’s a
good chance for mortgage rates to move marginally lower, that’s a risk we’d
only advise you to take if you’re aggressive and flexible. Mortgage rates won’t get lower as fast as it
might seem like they should given recent market movements, although today