Mortgage Rates: Two Days of Volatility Jammed Into One
Tuesday 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.
Wednesday 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.
Oh you know it's coming...
Today was a sensory overload for rate watchers. Lenders repriced for the worse. Lenders repriced for the better. In the end, mortgage rates were UNCHANGED ON THE DAY!!!
HAHA. I cannot make this stuff up. The extreme back and forth behavior we experienced on Tuesday and Wednesday managed to jam itself all into one day...today!
To be honest, reprices weren't as plentiful today as they were on Tuesday and Wednesday, but we definitely had to put up with some intraday volatility in loan pricing. The threat of reprices for the worse hung over our heads for hours before pressure was finally alleviated this afternoon. Some lenders repriced for the worse this morning. But they also repriced for the better this afternoon. In the end we're unchanged vs. yesterday.
4.875% is "Best Execution" for very well-qualified borrowers seeking a conventional 30 year fixed home loan. 4.75% is best execution on FHA/VA 30 year fixed loans. Some loan officers got upset with me for saying 4.625% FHA was "Best Execution". This is as good as it gets but we still find ourselves swimming in sea of random rate quotes. The primary mortgage market is very segmented at the moment. In reality, the best execution 30 year fixed mortgage rate is in a range between 4.75% and 5.125% with definite chances of phantom offers (very-well qualified borrowers) as low as 4.625% on FHA and as high as 5.25%. Phantom = elusive. We keep hearing whispers of these quotes but have yet to see proof of aggressive buydown structures.
Important Mortgage Rate Disclaimer: "Bext Execution" is the most efficient combination of note rate 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%. 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 recordation + escrows (things like upfront MIP (if required), property taxes, homeowners insurance, accrued interest.
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 event. Which means the best execution 30 year fixed mortgage rate could move 0.25% to 0.375% higher. It could also move back down firmly to 4.75% or even 4.50% if the bond market experiences a sustained recovery rally. AGAIN THIS IS A HIGH RISK EVENT!
What MUST be considered BEFORE one thinks about capitalizing on a rates recovery?
1. WHAT DO YOU NEED? Rates might not recover as much as you want/need.
2. WHEN DO YOU NEED IT BY? Rates might not recover as fast as you want/need.
3. HOW DO YOU HANDLE STRESS? Are you ready for MORE VOLATILITY in the bond market.