Mortgage Rates: Directional Crapshoot

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Home loan borrowing costs enjoyed modest improvements today.

While these gains are encouraging, fear of the unknown has put lenders back on the defensive. This is generally not a favorable environment for rate watchers.  The chance that our political leadership fails to agree on a U.S. budget plan by August 2nd has tilted the "path of least resistance" toward higher rates.

CURRENT MARKET*: The "BestExecution" conventional 30-year fixed mortgage rate is 4.625%.  Fewer lenders are offering 4.50% without charging an origination fee. On FHA/VA 30 year fixed "BestExecution"  is 4.375% but lenders seem more comfortable quoting 4.50%.  15 year fixed conventional loans are best priced at 3.75%, for now. 15 year BestExecution quotes are teetering on a shift higher to 3.875%.  Five year ARMs are best priced at 3.25% but the ARM market is more stratified and there is more variation in what will be "BestExecution" depending on your individual scenario. 

 See Rates from Lenders in Your Area

ONGOING GUIDANCE:   Floating in this environment is a crapshoot. Both stocks and bonds are maneuvering through major market uncertainties. Investors are focused on news headlines regarding U.S. budget issues, EU debt contagion concerns, economic data, and quarterly earnings. That puts the direction of mortgage rates at the mercy of factors that don't exactly adhere to schedules or expectations. While we still view underlying economic fundamentals as being supportive of lower mortgage rates in the future, the short-term risks associated with a potential U.S. debt default leave us more inclined to advise locking, especially deals that must be ready to close in the next 10-15 days. This provides protection from rising rates and still gives your lender a chance to negotiate if rates decline.

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*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.

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 want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough decisions?