If you missed the boat last week when this happened, you are getting another chance today. This has happened three times since August 31 and everytime it happened, it never lasted longer than 48 hours...
RECORD LOW MORTGAGE RATES ARE BACK ON THE BOARD
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. The best par 15 year mortgage rates are in a range between 3.500% and 3.875%. 5 year ARMs are being quote near 3.00% at a few lenders.
Mortgage Rate Disclaimer: Loan originators will only be able to offer these rates to borrowers who have perfect credit profiles and enough equity in their home to qualify for a refinance. 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 a risky investment.
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. If you are floating your loan, don't get greedy. We've seen lenders come out one day, offering the most aggressive loan pricing we've ever seen only to have them cushion it (worsen) the next. It comes and goes as lenders need production. READ MORE ABOUT LENDER CAPACITY CONSTRAINTS AND MORTGAGE RATES
While we do not yet see a reason to believe mortgage rates will dip below the record lows currently being offered by lenders, we do expect the uncertain economic environment and the potential for Federal Reserve quantitative easing to keep mortgage rates in a very aggressive range for an extended period. But there is a caveat.....
POTENTIAL ALERT: Mortgage rates are back at record lows because investors are anticipating the announcement of another Federal Reserve Quantitative Easing program sometime before January. Many believe this program will be concentrated on Fed purchases of Treasury debt. If this strategy was employed by the Fed, it would be highly supportive of a low mortgage rate environment. However, one of the main motivations for another QE program is the notion that inflation is weak. There is growing concern that the U.S. is already being sucked into a deflationary spiral, similar to Japan's economy which has floundered for the last 20 years for similar reasons (loans to dummy corporations). If the Fed is really concerned about raising inflation expectations, then perhaps we are not thinking outside of the box enough here. Perhaps we are missing the boat on what strategy they chose to employ. Perhaps the Fed doesn't purchase Treasuries? Maybe the Fed hikes rates??? Maybe there is some new asset swap window??? We're not sure yet, but in my opinion more Treasury purchases won't be as helpful in sparking growth as they were in stopping economic contraction. For example, record low mortgage rates haven't done much to spark a boom in housing but they've clearly helped housing work through the bottoming process. We know the Fed is strongly considering and probably already planning a program, but we cannot automatically assume this program is geared toward pushing benchmark yields and mortgage rates even lower. For this reason, I am very defensive about these record low mortgage rates. I am just not convinced the Fed isn't planning a "shock and awe" attack on disinflation.
To protect yourself from this POTENTIAL ALERT, I advise the following:
If you are a consumer looking to refinance your loan, we recommend you submit a loan application as soon as possible. This will ensure you are capable of locking in your borrowing costs if mortgage rates touch record lows again or begin to rise. Remember these below market quotes have only been offered for a short period of time, so you must be ready to lock when lenders push rates to record lows.