Mortgage rates rallied again today and consumer borrowing costs drifted a little lower.
Deciding whether or not to lock a loan between now and the “high-risk” event on Friday is pure
speculation (Employment Situation Report). If you know how that’s going to turn out
ahead of time and how the market will react, or if you just don’t mind losing money in exchange for the
chance to lower your rate a bit more, power to you! The way we see it though, if yesterday was nuts, today may be time to consider how you’ll hoard your nuts.
IMPROVED CURRENT MARKET*: The BestExecution
conventional 30-year fixed mortgage rate has improved to 4.375%. Some lenders
are even offering 4.25% but that quote carries with it additional closing
costs. On FHA/VA 30 year fixed BestExecution is 4.25% with some
lenders willing to go as low as 4.00% (includes additional closing
costs). 15 year fixed conventional loans are still best priced at 3.75%
but we’ve seen aggressive quotes at 3.625% too. Five year ARMs are still best
priced at 3.25%.
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
GUIDANCE: Markets have shifted their attention back to economic
fundamentals, which have been supportive of lower mortgage rates lately.
And while plenty of indicators do have the potential to improve the overall
economic outlook in the days ahead, they’re more than likely going to
confirm a dour situation and keep a lid on rising mortgage rates. The most
influential data-point of the week comes on Friday morning, with the release of
the July Employment Situation Report. We’ll need this report to confirm the
rally we’ve enjoyed over the past three days. From that perspective,
given the size and speed of the recent rally, we may see rates go sideways for
a few days and maybe even inch higher. This behavior would not be a sign of
shifting sentiment as much as it would illustrate rally exhaustion. Put more
simply, no rally lasts forever, especially when a “high-risk event”
is just ahead. A path has however been paved for our longer-term mortgage
rate outlook to come true. That means we see lower mortgage rates in the not so
distant future. Just remember, it may not be a direct path lower, there will be
ups and downs along the way.
MORE PERSPECTIVE: Bond Market Officially Repeats History. Reality Restored
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 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 fiscal frisking that comes along with the underwriting process