Mortgage rates had a great day yesterday. This is the message we communicated to readers...
you've been floating your loan or have yet to apply for a refinance
because it just didn't seem worth the hassle, congratulations, mortgage
rates hit new lows today, it's now worth the hassle! If you've
refinanced in the last 20 months, there is a darn good chance your
refinance option is back in the money, again!
The best 30 year fixed mortgage rates have fallen into the 4.125% to 4.375% range for well-qualified consumers. Some lenders will even go as low as 3.875% if the borrower is willing to pay points. Although the 4.125% quote isn't being offered by the large retail banks (sorry retail L.Os), the smaller mortgage bankers and independent brokers do have access to loan pricing that will allow them to offer new rate lows.
Today was not so great...
After weeks of stagnation, stocks finally took their turn in the spotlight today. As money moved out of the bond market and into equities, mortgage-backed security prices fell and lenders were forced to reprice for the worse. Consequently, consumer borrowing costs are higher than they were yesterday afternoon. The damage was not terribly dramatic though...
The best 30 year fixed mortgage rates are still in the 4.125% to 4.375% range for well-qualified consumers, but less lenders are offering rates below 4.25% today. If your lender is still willing to offer a rate below 4.25%, your closing costs are about 25bps higher today (0.25% of your loan amount). Actually, borrowing costs are about 25 basis points higher across the board.
While a better than expected read on the manufacturing sector has been cited as the stock market's prime motivation and the bond market's sole source of weakness, we think other factors were at work.
Call it exhaustion, blame it on boredom, but it is a new month and market participants took advantage of an opportunity to try something different. The bond market rallied all summer and has been viewed as "overbought" by many investors for the last two weeks. Unfortunately, weak economic data has prevented the bond market from correcting itself. Better than expected manufacturing data, a sector the market views as weak, gave investors the chance to let that correction take place today.
We're not panicking over this sell off. There has been no change in our fundamental economic outlook, we see no new reason to be optimistic about a rapid recovery. What we witnessed today was a technical adjustment, an adjustment that could reverse course on Friday morning if the Employment Situation Report fails to match economist expectations. It also an adjustment that could be built on if the employment report meets or surpasses forecasts. Either way, the market remains non-committal and fluctuations are expected to occur within a range. The overall outlook remains highly supportive of low mortgage rates.
Now that doesn't mean we're all aboard the float boat though. If you've been offered a rate at or below 4.25% and can still execute it, we think you should cash in your chips and lock your loan. If you've lost this quote and are back to square one, we think you can afford to float as long as you're not on a deadline. Your borrowing costs might rise a few basis points in the near term, but we think you'll have another opportunity to lock in at today's pricing, and potentially yesterday's pricing, sometime in the next month.
Remember our advice. This is extremely important!
The "best executed" lock/float strategy comes down to finding an originator who knows the loan market, studies underwriting guidelines, and just plain old gets the J.O.B done. You have to let the loan officer earn their commission. That's how you "ride the float boat" in this environment...make sure you have a damn good skipper. Plain and Simple.