Mortgage rates started to rise yesterday as stock markets rallied from an eight session low. While only a few lenders repriced for the worse, mortgage-backed securities prices were led lower by an increase in benchmark Treasury yields. This set the stage for lenders to increase mortgage rates this morning.
The economic calendar is empty today. When economic data is light, typically the stock market has a larger impact on the bond market, we call this the stock lever. If stocks move higher, it is generally at the expense of the bond market. On the other hand, if stocks move lower the bond market usually benefits.
While we had no scheduled economic releases, however, Goldman Sachs reported first quarter results… and they blew away expectations. They reported earnings per share of $5.59 when only $4.01 was expected. Total revenue also beat analyst estimates coming in at $12.78 billion against estimates for $11.07billion. This was a 36% increase from the first quarter of last year. Total net income for the quarter was $3.46billion. AQ discussed how mortgage professionals might be able to identify with Goldman Sachs. READ MORE
Reports from fellow mortgage professionals indicate lender rate sheets to be slightly worse than yesterday. The par 30 year conventional rate mortgage remains in the 4.875% to 5.125% range for well qualified consumers. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.
If you plan on keeping the current home for less than a couple years, you should consider a no cost to you loan. That means the lender gives you a higher interest rate and pays the closing costs for you.
Most no cost loans are currently running around 5.50% to 5.625%. Even if you plan on keeping the current home for less than 2 years, and your current rate is higher than the mid-5’s, you should consider a no cost loan. If you can lower your interest rate for free, why not do it.
If you plan on keeping the current home for a longer period, it will make more sense to pay the closing costs and secure the lower interest rate. One way or the other, you as the consumer always pays the costs… you either pay up front in the form of closing costs or pay over time with a higher interest rate.
Your mortgage professional should be able to provide you with a breakeven analysis that can help you determine the optimal fee versus rate option for you and your family.
Despite mortgage rates bumping a few basis points higher, I continue to favor locking. Stocks seem like an unstoppable force moving higher plus we have more Treasury auction supply coming on Thursday. Both of these factors are pressuring mortgage rates higher. Additionally, mortgage rates are only 0.125% away from the best rates of the year so you do not have much to gain by floating.