Freddie Mac was out yesterday with the industry's most
commonly cited benchmark for weekly rate movements, but it's important to know that this is an average that's tallied through Wednesday. By the time the survey results are out, the Mortgage rate landscape may have completely changed if markets are as volatile as they have been. This was the case on Thursday when rates rose another eighth to quarter of a point. That was bad enough, but today's volatility takes rates another quarter of a point higher!
That makes today one of the most destructive days for mortgage rates so far this year. Taken together with the previous two days, it's the most abrupt weekly move higher that we have on record. If you're a consumer staring at a rate quote in
disbelief, or a Loan Originator who doesn't happen to be a member of MBS Live, please know that today's movements are very real and very justified based on the price movements in MBS.
Today is one of two times in the past 10yrs where the average borrowing rate for top tier scenarios moved up by at least a quarter of a point. A quarter of a point may not sound like much, but in terms of day-to-day movements in 30yr fixed mortgage rates, it's catastrophic. That leaves best-execution at a stomach-churning 4.625% today.
(READ MORE: MBS RECAP: Darkest Depths and Waking Nightmares)
This movement will eventually end. It could be Monday or rates could go higher all next week. The assessment today is exactly the same as it was yesterday: We'd like to say "we've moved high enough, fast enough that we'll
probably be able to dig in and hold some ground here," but that's not
safe yet. Market participants themselves, let alone mortgage lenders,
are still feeling out the post-Fed-Announcement environment. There's no
reason rates can't go even higher just because they've moved so high,
The emotions that tend to accompany times like this can border on overwhelming. If the perspective helps, try to look at your options in terms of payments and costs instead of rates themselves. If you're a consumer, understand that your loan originator is actually every bit as traumatized by this week as anyone, and that no one saw a move quite this big happening quite this fast. Work together to quickly examine what the options are and assess the trade-offs between scenarios.
Look at different terms, different loan types, different levels of buydown (contrary to misguided popular belief, "points" are not a bad thing. Just understand that they amount to a choice between paying interest now or later). Some borrowers may want to pay more closing costs right now in order to get to the payment they can afford. Ultimately it's your choice as to what works best for you, but the message is that we're all in this together, and we're all ultimately working toward the same goals.
More background on the abrupt movements:
May 22nd: Why Did Mortgage Rates Skyrocket Past 2013 Highs on Wednesday?
May 28th: Mortgage Rates Vault Catastrophically Higher
June 19th:Mortgage Rates Annihilated; Brief History of All-Time Lows
Loan Originator Perspectives
"If you are a consumer, and you are shopping rates between lenders, I'd
advise you to pick the lender you are most comfortable with, move
forward with them and lock your rate in. I have a customer that has
been going back and forth between another lender and myself since last
week, over a few hundred dollars, and his rate has now gone from 4.125%,
with a $1500 credit, to 4.5% with no credit! Find someone you like and
that is giving you a competitive offer, and lock it in. Who knows
where things ride stops!" -Jason York, VP of VA Operations, Prime Mortgage Lending
"We continue to see constant capitulation in longer term treasuries and complete annihilation of MBS. It would be nice to paint a picture of a possible rebound but obviously all bets are off. The free capitalistic market has to work its way through layers of artificial technicals and determine where it needs to be. It's similar to the concept of a fire in a movie theater, everyone gets trampled during the stampede. Floating is a losers game if closing within 30 days, 45-60 should consider locking as well, as time value has not been an element of success." -Constantine Floropoulos, Quontic Bank
"As of this afternoon, rates are up about 1.25% from record lows, but if
this levels off for awhile, it won't choke off housing or a broader
recovery. It's been a brutal week, but not time to panic yet about the
rate spike causing broader economic turmoil. " -Julian Hebron, Branch Manager, RPM Mortgage
"I picked a good week to go on a short vacation. Big Ben has not helped
mortgage rates or bond markets at all. Stock market isn't thrilled
either. My advice to any consumer is lock now because rates aren't
coming back down without a total melt down in stocks and some sort of
tape bomb from left field. If you were on the fence for a refinance,
you can climb down and go home because whatever you were waiting for is
never coming back. Purchasers would be wise to lock asap too." -Mike Owens, Partner, Horizon Financial Inc.
"With rates on a steady and rapid increase I am advising my clients to
lock in their rate at application, floating is too much of a gamble." -Kenneth Crute Branch Manager Prime Mortgage Lending Inc
Today's Best-Execution Rates
- 30YR FIXED - 4.625%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 3.625%
- 5 YEAR ARMS - 2.875-3.375% depending on the lender
Ongoing Lock/Float Considerations
- After rising consistently from all-time lows in September and October 2012, rates challenged the long term trend higher, but failed to sustain a breakout
- Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
- Fears about the Fed's bond-buying intentions were proven well-founded on May 22nd when rates rose to 1yr highs after the Fed indicated their intention to taper bond buying programs sooner vs later
- The June 19th FOMC Statement and Press Conference confirmed the suspicions. Although tapering wasn't announced, the Fed made no move to counter the notion that they will decrease bond buying soon if the economic trajectory continues
- (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario. There are many reasons a quoted rate may differ from our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).