Today's much anticipated high risk event, the FOMC Statement and subsequent press conference, leaves fence-sitters unscathed as no changes in home loan borrowing costs were seen before or after headline news was released. Best Execution 30-year fixed mortgage rates are the same as they were yesterday. Those who locked ahead of the event didn't "miss out" on additional gains. Those who've been more inclined to float received no reward for doing so...
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: If you have the flexibility to wait until Thursday morning to see how rates fared after tomorrow's Fed Announcement, that's allowable even if it's not advisable due to the limited nature of potential gains. We say that because we do think it's possible the Fed signals a less optimistic outlook this week, which would be supportive of an improvement in Best Execution Mortgage Rates. But just because it's POSSIBLE, doesn't mean it's LIKELY though. Things can go either way, and the secondary mortgage market is definitely showing its resistance to the idea of taking the conventional 30yr fixed Best-Execution rate below 4.875%. If you're in the market to remove risk from your scenario, now's a great time to favor locking. Conversely, if you're in the market for risk, it's also not insane to float for potential gains. Good times...
CURRENT GUIDANCE: The FOMC meeting has come and gone with little change in our outlook. There was a modest downgrade in the Fed's economic projections but they anticipate that slowdown to be "transitory". As a result the secondary mortgage market continues to affirm its resistance to breaking through the Best-Execution barrier at 4.875%. With the surprisingly tame reaction to the FOMC Statement and press conference, the onus is now placed on the week's remaining data and final Treasury auction to round-out the overall guidance for bond markets in the days ahead. We're still entertaining possibilities in either direction, but with the understanding that breaking 4.875% is still just as difficult as it was the last time rates stagnated there for over a month. Inclined floaters are advised to keep a very close eye on rate movements, especially with borrowing costs in a holding pattern near one-month lows. Bottom Line: today wasn't enough to get rates unstuck.
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 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.