Mortgage Rates: Multiple Reprices for Better Reported. Borrowing Costs Down
Yesterday was a sensory overload for rate watchers. Lenders repriced for the worse. Then they repriced for the worse again. And again. One lender recalled rate sheets five times! I am not kidding. 5 TIMES!! That is a lot of repricing for the worse. Repricing for the worse = higher mortgage rates.
Today was a sensory overload for rate watchers. Lenders repriced for the better. Then they repriced for the better again. And again. One lender recalled rate sheets five times! I am not kidding. 5 TIMES!! That is a lot of repricing for the better. Repricing for the better = lower mortgage rates.
The culprit behind yesterday's sell off was a weak Treasury auction. The culprit behind today's rally was a strong Treasury auction (although we witnessed bargain buying before the auction).
Sorry for repeating myself but that was the easiest way to explain the events that have played out over the last 36 hours in the primary mortgage market. I suppose I could've just as easily said "up up up up up...down down down down down"
Plain and Simple: It was another volatile day in mortgage-land. But this time volatility worked out in our favor. We erased yesterday's loan pricing losses!
After reprices for the better we've heard scattered reports of lenders quoting 4.75% to very well-qualified 30yr fixed borrowers again. FHA quotes go as low as 4.50%, but they are phantom. The primary mortgage market is still very segmented though. The best execution 30 year fixed mortgage rate is in a range between 4.75% and 5.00% with definite chances of phantom offers (very-well qualified borrowers) as low as 4.625% and as high as 5.125%.
Important Mortgage Rate Disclaimer: Loan originators will only be able to offer these rates on agency conforming loan amounts to very well qualified borrowers who are 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 recordation + escrows (things like upfront MIP (if required), property taxes, homeowners insurance, accrued interest.
For borrowers who need to lock before January 7th. On conventional 30 year fixed loans, 4.75% is as good as it gets for you. I would target this offer and lock when you reach it (see disclaimer above). On FHA 30 year fixed loans, 4.50% is as good as it gets but you're more likely to be quoted 4.625% or 4.75%. 4.50% is phantom but we hear more of those FHA offers than we do 4.75% conventional 30 year fixed.
For anyone who is waiting for mortgage rates to inch lower, the bond market faces a major hurdle on January 7, 2011 when the December Employment Situation Report is released. If you are currently being quoted a rate that would reduce your monthly loan payment (enough to be worth the hassle of refinancing), the intermediate term direction that mortgage rates take is largely dependent on this jobs report and revisions to the previous data. Floating into and through this economic data release is a high risk/high reward event. Which means...if weak November data is confirmed when the December report prints, the best execution 30 year fixed mortgage rate could move back down to 4.50%. However if major positive revisions are made to the November Employment Report (which was released in December), then mortgage rates would be expected to remain at current levels or even move higher.
Floaters: January 7, 2011 is a high risk/high reward event
Lockers: 4.75% is your best execution target. The quote is out there, you just gotta find it. (see disclaimer above)