After setting new lows last Thursday, mortgage rates drifted higher this week...that is until today when consumer borrowing costs improved sharply. This can be seen in the chart below....

If the note rate line is moving up, the closing costs associated with it are on the rise.  If the note rate line is moving down, the closing costs associated with it are falling. The lowest home loan borrowing costs of our lifetime were available last Thursday. They didn't stick around long though, mortgage rates went on a four day losing streak after that which pushed BestExecution quotes up by 0.125 to 0.25%.  Fortunately, anyone who didn't lock their loan already was given a reprieve today when the market improved.  Mortgage rates aren't quite as low as they were last Thursday, but they're still super aggressive.

The chart above compares the average origination costs (as a percentage of loan amount) for several available mortgage note rates as quoted by the five major lenders. Each line represents a different 30 year fixed mortgage note rate.  The numbers on the right vertical axis are the origination closing costs, as a percentage of your loan amount, that a borrower would be required to pay in order to close on that note rate. If the note rate graph line is below the 0.00% marker, the consumer may potentially receive closing cost help from their lender in the form of a lender credits. If the note rate line is above the 0.00% marker, the consumer should expect to pay additional points at the closing table to cover permanent buydown costs and origination fees. PLEASE SEE OUR MORTGAGE RATE DISCLAIMER BELOW

CURRENT MARKET*: The BestExecution 30-year fixed mortgage rate has moved down to 4.125%. Several lenders are willing to offer lower rates, but those quotes carry with them additional closing costs.  On FHA/VA 30 year fixed BestExecution has improved back to 4.000%.  Deals can be structured with lower rates, but again, you'll pay more for those, so make sure you assess the time it takes to break-even on the extra expense.  15 year fixed conventional loans are best priced at 3.625%. Five year ARMs are still best priced at 3.250%. ARMs seem to have bottomed out. 

A note on the greater-than-normal variation in rate offerings between lenders.  There is an increased amount of variety in what individual lenders are now quoting as their BestExecution rates.  This is a factor of price volatility in the secondary mortgage market. Unfortunately when volatility picks up in the secondary mortgage market, the cost of doing business gets more expensive for lenders (hedging costs go up). Those added costs are usually passed down to consumers via extra margin in rate sheets.  Additionally, the recent rates rally makes lenders busy enough that some control their inbound volume by raising rates regardless of the secondary mortgage market in order to discourage new applications/locks.

GUIDANCE: If you missed the boat on record low mortgage rates last November/October, the opportunity is still out there for the taking. And we think you should jump on it as soon as possible. The risks involved in floating have greatly expanded to include (1) lenders taking it upon themselves to negatively adjust rate sheets (to slow loan production) and (2) interest rates finding a bottom and moving higher on their own.   The frustration of missing out on "high 3's" and instead getting "low 4's" seems nowhere near as bad as the frustration of missing out on a refi opportunity (moving from 5% to 4.125% for instance) altogether.  If you decide to wait it out for lower rates, you're basically betting on a weak jobs report next Friday.

Refi Roadmap: A Locked Rate Isn't a Closed Loan <-- must read

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*Best Execution is the most cost 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 30year fixed conventional/FHA/VA mortgage rates still include closing costs such as: third party fees + title charges + transfer and recording. Don't forget the fiscal frisking that comes along with the underwriting process

CAUTION: MND guidance is speculative in nature. We don't have a crystal ball, we can't predict the future, we can only share our outlook. Making the following considerations extra important........................

What MUST be considered BEFORE one thinks about capitalizing on a rates rally?

   1. WHAT DO YOU NEED? Rates might not rally as much as you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough decisions?