Consumer borrowing costs were what I would consider "noticeably more expensive" this morning when lenders first released rate sheets. While home loan rate quotes below 4.00% were still widely available, lenders increased closing costs anywhere from 0.25% to 0.55%, as a percentage of the loan amount. The uptick in borrowing costs was a factor of positive appreciations in global stock markets, a slow economic calendar in the U.S and looming Treasury debt auctions, which traders made room for by pushing benchmark interest rates higher.
Fortunately for rate watchers things turned around about an hour after the Treasury Department successfully auctioned $21 billion 10 year notes when bargain buyers swooped in to take advantage of five day price lows/yield highs. A modest recovery rally ensued into the close as more investors looked to call a short term bottom in bond valuations (day trading/short covering). Led by benchmark Treasuries, MBS prices quickly moved to session highs which allowed some lenders to reprice for the better, some but not all.
After all was said and done, closing costs are still higher on average today, but at least they're not "noticeably more expensive" like they were on first releases of rate sheets this morning. The best par 30 year fixed mortgage rates remain in the 4.000% to 4.250% range for well-qualified consumers. Some lenders still go as low as 3.75% 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%. 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 riskier investment. (investment properties and second homes are a riskier investment )
While we do not yet see a reason to believe mortgage rates will dip below the record lows that were offered by lenders last week and are still offered by lenders right now (with more expensive closing costs), 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.
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
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 closing costs cheapen up or mortgage rates begin to rise (biggest threats: inflationary expectations and budget deficit concerns).