Although costs inched slightly higher today, the overall picture of this week in mortgage rates was finalized today and it doesn't look too bad. In terms of costs, the secondary mortgage market is nearly one full percent higher than it was at the lowest points on Monday. The day was uneventful and not the most informative in terms of market-based events or volume. Losses looked more severe this morning, but by the end of the day, the secondary market had battled back to close out the week just slightly worse than yesterday's prices.
CURRENT MARKET: The "Best Execution" conventional 30 year fixed mortgage rate is no longer split between 5.125% and 5.25%....it has fallen firmly to 5.125%. After today's gains, there's an opportunity at 4.875% for those who wish to buy down their rate, as this will involve much higher closing costs than 5.125, but among the potential rates attainable with buy-downs, 4.875 is the best-execution among them. The upfront cost of permanently buying down your rate from 5.125% to 4.875% may not be worth it to every applicant. We would generally advise the permanent floatdown if you plan to hold your new mortgage for longer than the next 5 years. Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is 4.875%. 4.75% quotes are available but borrowers should expect to pay origination fees. 15 year fixed conventional loans are still best priced between 4.25% and 4.375%. Five year ARMS are best priced at 3.75%.
YESTERDAY'S GUIDANCE: Reprices for the better were seen today or in some cases lenders just priced aggressively in the morning and didn't need to reprice. The secondary mortgage market gives the appearance currently, that it's getting back on its winning streak, but our defensive stance from yesterday is unchanged today. Why? Because today's rally was driven in part by two significant, but temporary factors. Geopolitical turmoil in the Mid-East continues to foster demand for US Treasuries, which indirectly benefit demand in the Secondary Mortgage Market. In addition, some of the rally today was driven not by those who want rates to go lower, but those who are cutting their losses on the bet that rates were going higher. Bottom line, there's still just NOT ENOUGH behind today's gains. Still waiting for SOMETHING MORE DEFINITIVE. STILL DEFENSIVE, but with even better rates than yesterday.
NEW GUIDANCE: Defensiveness paid off yesterday for anyone who saw rates as good enough to pull the trigger. Some of the things leading to better rates yesterday were just not the kind of things we can count on steadily contributing to market movements. Today is no different. So guidance remains in favor of staying defensive (i.e. leaning towards locking and ready to do so at a moment's notice). We're still waiting for "something more," and still not confident that we've begun a mortgage rate recovery. With no economic data to inform the markets today and with a holiday on Monday, we'll have to wait until next week to find out if the generally positive trends seen this week will continue.
What MUST be considered BEFORE one thinks about capitalizing on a rates
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 secondary mortgage market?
"Best Execution" is the most 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 buydown 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 intense fiscal frisking that comes along with the underwriting process.