Yesterday we took a moment to rejoice the reversal of Friday's mortgage rate degredation, but left it with the following statement...

"I know that all sounds encouraging and might even draw a "sigh of relief", but we are still hesitant to get excited about positive progress in mortgage rates. A greater than normal amount of uncertainty is governing the global economic investing environment. Couple that with what is traditionally a "hard to read" time of year (year end on Wall Street), and it makes sense to say if you're floating your loan on a closing deadline you should meet with your loan originator to indentify  an acceptable payment range and coordinate a short term loan pricing/buydown target based on your specific scenario."

In other words, be defensive!  In fact,  "Defensive Outlook in Place" found its way into the headline of last night's post.  Well, we didn't think it would get this bad but the bond market tanked today and mortgage rates rose again.  Multiple reprices for the worse were reported. Yes folks... It CONTINUES to be a very wild and very bumpy ride for rate watchers. Large-scale fluctuations are now the norm. 

The generally accepted culprit of today's rout is twofold, beginning with an Irish budget cut and intensifying with a Congressional compromise on extending both the Bush era tax cuts and unemployment benefits. Tax cut extensions lifted the stock market right out of the gate (and hurt bonds) while news that Ireland was close to confirming austerity measures was an early motivator of interest rate weakness in U.S. benchmarks (stole demand from Treasuries).

When all was said and done, prices of loan production MBS coupons (which guide lender rate sheets) had fallen over a full point!  To bring that number into reality, this basically means that in order to get the same rate today as was available yesterday, it would cost an additional 1% of your loan amount, or for example, another $2500 of closing costs on a $250,000 loan.   But when the market is falling as fast as it was today, lenders tend to adjust loan pricing "on the come," effectively taking it away a bit more aggressively than a purely mathematical adjustment based on MBS prices.  So not only did we have weakness out of the gate, but most lenders repriced for the worse in the middle of the day and again this afternoon.

And so it is that even the best qualified borrowers find themselves looking at something around 4.75% on a 30yr fixed loan.  4.625 is not out of reach but the buydown is unattractive at most lenders.  As always, these figures assume a 740+ credit score with 20% down (or equity based on appraised value), and an otherwise blemish free loan file (no LLPA's) with nominal closing costs (lender/broker compensation in a tight range around 1% of the loan balance).

Important Mortgage Rate Disclaimer: Loan originators will only be able to offer these rates on agency conforming loan amounts to borrowers who are 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 recordation + escrows (things like upfront MIP (if required), property taxes, homeowners insurance, accrued interest)".

Today's advice is the same as yesterday.  Volatility and uncertainty remain ways of life.  We are NOT in a position yet to say we've reached some important support levels that should allow mortgage rates to recover.  Things can get worse before they get better, and judging by what we've seen in recent weeks, will probably do a little bit of both in rapid succession.  For those who must pull the trigger in December, get safe and get out with a liveable payment.  All others are at the whim of a market that makes no promises as to when or if it will see improved loan pricing.