Home loan borrowing costs improved slightly today, though Best-Execution mortgage rates were unchanged.   This extends a rate-watcher friendly trend in the primary mortgage market. Here is a chart illustrating the recent behavior of consumer borrowing costs.

In stark contrast to yesterday's volatility, today was a sideways session.  In fact, the secondary mortgage market really didn't rally enough to justify improved rate sheets.  Instead, the improvements were due to yesterday's rally,  which was not entirely passed along in rate sheets due to market volatility. 

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate is 4.875%. If you are looking to move down to 4.75%, this offer carries higher closing costs but could be worth it to applicants who plan on keeping their new mortgage outstanding for longer than the next 10 years.  Some lenders are beginning to price loans more aggressively because competition is tight, so scattered sightings of 4.75% are possible, but not on a wide-spread basis. Ask your loan officer to run a break-even analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is still 4.75%.  15 year fixed conventional loans are best priced at 4.25%. Five year ARMs are still seen best priced at 3.50% 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:  We don't know how long this rally will last but the manner in which it's progressing is among the more aggressive eventualities we foresaw when upgrading our "lock/float" outlook.  If you've been floating since we first reintroduced it as an option just over a week ago, you've saved enough money that it makes good sense to lock your rate and move on.  One of the key reasons for that: 4.875% Best-Execution will be hard to break and rates are basically back at their best levels since January with the exception of a short period in the middle of March (which benefitted from a flight to safety rally fueled by crisis in Japan).  We'll keep the door open for inclined floaters until loan pricing begins to worsen.  Those who can't afford to pay higher closing costs than their current quotes should always lock.  At least right now, you can do so knowing you've locked at some of the most aggressive rates of the year.

CURRENT GUIDANCE:  As long as bond markets continue to demonstrate the general level of strength that has characterized recent trading, the door continues to stay open for floaters.Same guidance as above.



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?


"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 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 intense fiscal frisking that comes along with the underwriting process.