Mortgage Rates Continue Unprecedented Surge Higher
Mortgage Rates finally lost less ground than they have over the past few business days. The problem is that this still left room for rates to go higher at a much faster pace than normal. Some borrowers will have seen their quoted rate move up another eighth to a quarter, depending on the lender. After rising to 4.625% on Friday, Conventional 30yr Fixed "best-execution" is currently between there and 4.75%. Lenders continue to offer lower rates in exchange for increased upfront costs, but those rates have deteriorated (meaning costs have increased) significantly faster than rates in the best-execution zone.
As we often say, "volatility" is unkind to mortgage rate sheets. The wider the range of potential outcomes lenders are forced to defend against, the less aggressive they can afford to be with rates, regardless of whether or not today's rates improved. In other words, an awesome day for mortgage rates is made less awesome by volatility, and a bad day is made extra bad. In that sense, current rate levels are a product of a double whammy between current trading levels and the need to account for volatility. As of now, volatility should be assumed to be expanding or steady at high levels until we have clear reason to believe it's receding, and we're not there yet.
This continues to be one of, if not THE most significant move in the modern history of mortgage rates (in terms of the pace of change).
What others are saying in the Industry....
"The volatility in mortgage rates has been unprecedented. Daily swings cause changes intraday and unfortunately that creates distortion for consumers. The recent volatility will not subside until the free market determines where the real bid/ask is minus the FED. Until that point expect the swings to continue. 30-45 days should be locking. Longer term may be able to float, however we do not recommend it with the current environment. We went from low 3's to high 4's in a couple of weeks, and this morning we were possibly talking 5's. the day is not over and the week just begun. " -Constantine Floropoulos, Quontic Bank
"Last Wednesday, Fed chairman Bernanke said during a post-FOMC press conference that rising home prices compensate for higher rates. Then on Friday, Bank or America Merrill Lynch's MBS team was out with a note reacting to this stance by Bernanke, saying: "we would guess the Fed assumption is that a 5% mortgage rate would be acceptable." If this is the case, hoping for a near-term dip in rates could prove futile. " -Julian Hebron, Branch Manager, RPM Mortgage
"Rates can't go any higher can they"? I don't know they went up 1/2 point last week. Market is way oversold and rates should come down a little from here I believe. Below 4% probably not, but we can live with the low 4s. Just don't need the 5s to show up. Purchases, I believe should be locked once a contract is signed, if debt ratios are pushing the limit. However, if your loan officer is a MBS Live member, they can gauge whether to lock then or float with an itchy trigger finger." -Mike Owens, Partner, Horizon Financial Inc.
"Today stands as an excellent example of why I strongly recommend my clients lock in their rate upfront. Until we see some calm rational trading days there is no better protection than locking in. " -Kenneth Crute Branch Manager Prime Mortgage Lending Inc
As we often say, "volatility" is unkind to mortgage rate sheets. The wider the range of potential outcomes lenders are forced to defend against, the less aggressive they can afford to be with rates, regardless of whether or not today's rates improved. In other words, an awesome day for mortgage rates is made less awesome by volatility, and a bad day is made extra bad. In that sense, current rate levels are a product of a double whammy between current trading levels and the need to account for volatility. As of now, volatility should be assumed to be expanding or steady at high levels until we have clear reason to believe it's receding, and we're not there yet.
This continues to be one of, if not THE most significant move in the modern history of mortgage rates (in terms of the pace of change).
What others are saying in the Industry....
"The volatility in mortgage rates has been unprecedented. Daily swings cause changes intraday and unfortunately that creates distortion for consumers. The recent volatility will not subside until the free market determines where the real bid/ask is minus the FED. Until that point expect the swings to continue. 30-45 days should be locking. Longer term may be able to float, however we do not recommend it with the current environment. We went from low 3's to high 4's in a couple of weeks, and this morning we were possibly talking 5's. the day is not over and the week just begun. " -Constantine Floropoulos, Quontic Bank
"Last Wednesday, Fed chairman Bernanke said during a post-FOMC press conference that rising home prices compensate for higher rates. Then on Friday, Bank or America Merrill Lynch's MBS team was out with a note reacting to this stance by Bernanke, saying: "we would guess the Fed assumption is that a 5% mortgage rate would be acceptable." If this is the case, hoping for a near-term dip in rates could prove futile. " -Julian Hebron, Branch Manager, RPM Mortgage
"Rates can't go any higher can they"? I don't know they went up 1/2 point last week. Market is way oversold and rates should come down a little from here I believe. Below 4% probably not, but we can live with the low 4s. Just don't need the 5s to show up. Purchases, I believe should be locked once a contract is signed, if debt ratios are pushing the limit. However, if your loan officer is a MBS Live member, they can gauge whether to lock then or float with an itchy trigger finger." -Mike Owens, Partner, Horizon Financial Inc.
"Today stands as an excellent example of why I strongly recommend my clients lock in their rate upfront. Until we see some calm rational trading days there is no better protection than locking in. " -Kenneth Crute Branch Manager Prime Mortgage Lending Inc
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