Volatility attacked on Tuesday and attacked again today.
For the second time this week, home loan
borrowing costs have risen about as much as they can without negatively
impacting the CURRENT MARKET Best Execution Mortgage Rates.
The abrupt jump in cost is again due to bond market volatility following a
"technical breakdown." Read More from MBSonMND.
CURRENT MARKET*: The "Best Execution" conventional 30-year
fixed mortgage rate has risen to 4.625%. Some lenders may already be quoting 4.75% though. On FHA/VA 30 year
fixed "Best Execution" is 4.375% and
potentially even 4.50% at some lenders (GNI pricing = better). 15 year
fixed conventional loans are now best priced at 3.875%. Five year ARMs are still best
priced at 3.25% but the ARM market is more stratified and there is more
variation in what will be "Best-Execution" depending on your
individual scenario.
PREVIOUS GUIDANCE: After failing on repeated occasions to
extend the two-month rally, mortgage rates are acting exhausted. That means the
path of least resistance is up for interest rates, at least in the short-term.
That puts us in a defensive posture for the next 10 to 20 days. We are not
ready to change our outlook for lower rates by the end of the summer though.
This corrective behavior happened last year too, which supports our long
standing view that "history is repeating itself" in the bond
market.
CURRENT GUIDANCE: Previous guidance nailed it: The path
of least resistance is up for interest rates, at least in the short-term. That
puts us in a defensive posture for the next 10 to 20 days. And markets demonstrated that again today
with sharp increases in costs. You have
two choices: 1) lock up and get out now, avoiding any ongoing volatility or 2)
try to capitalize on a brief correction.
The former is the safe advice.
With respect to the latter, there will be ups and downs no matter which
direction rates are moving. And in the
current environment, those swings can be BIG.
You're almost looking at another note rate higher in terms of
Best-Execution quotes, so PROTECT THAT, especially if you can't afford to lose
it. For the thrill-seekers out there, or
the longer-term, more flexible scenarios, we haven't seen anything yet that
kills chances of lower rates by the end of the summer. Bumpy ride in assessing that possibility
though.... Making the following "rules of
the game" doubly 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?
SEE A CHART OF NEW YTD RATE LOWS
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"Best Execution" 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 "Best Execution"
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.