Posts Tagged ‘30 year fixed mortgage’

A scary setback early in the week had us on the edge of our seats but home loan borrowing costs managed to recover thanks to a "flight to safety" in the bond market. This helped mortgage rates end the week near the same levels they closed at last Friday.

A "flight to safety" happens when investors are nervous about owning risky assets like stocks, but do not want to miss out on earning a return on their funds, so they allocate their money into risk-free government guaranteed U.S Treasury debt to provide a safe-haven and an investment return. As benchmark Treasury yields fall on "flight to safety" buyer demand, prices of mortgage-backed securities move higher in unison. This allows lenders to reprice their rate sheets for the better and gives originators an opportunity to offer fence-sitting borrowers lower mortgage rates or more competitive closing costs.

In the chart of Consumer Rate Quotes below, if the line is moving up, closing costs are rising.  If the line is moving lower, costs are getting cheaper. Sideways mortgage rate behavior followed by an abrupt drop followed by another spell of mostly sideways activity can be seen when looking closer at the chart . More recently however a slight uptrend is noticeable, this is the "scary setback" we referenced above. Costs have however corrected from that slight spike.   Loan pricing is not as aggressive as it was on June 3rd (best day to lock all year so far), but we're getting closer to those levels again...

The chart above compares the average origination costs (as a percentage of loan amount) for several available mortgage note rates as quoted by the five major lenders. Each line represents a different 30 year fixed mortgage note rate.  The numbers on the right vertical axis are the origination closing costs, as a percentage of your loan amount, that a borrower would be required to pay in order to close on that note rate. If the note rate graph line is below the 0.00% marker, the consumer may potentially receive closing cost help from their lender in the form of a lender credits. If the note rate line is above the 0.00% marker, the consumer should expect to pay additional points at the closing table to cover permanent buydown costs and origination fees. PLEASE SEE OUR MORTGAGE RATE DISCLAIMER BELOW

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate is 4.50%. Some lenders may be quoting 4.50% with increased closing costs in the form of origination fees. Some lenders may also be quoting 4.375%, but those offers will definitely carry additional closing costs.  These costs could be worth it to applicants who plan to keep their new mortgage outstanding for long enough to breakeven on the extra upfront costs.  On FHA/VA 30 year fixed "Best Execution"  is 4.25%.  15 year fixed conventional loans are best priced at 3.75%. Five year ARMs are best priced at 3.125% but the ARM market is more stratified and there is more variation in what will be "Best-Execution" depending on your individual scenario. 

PREVIOUS GUIDANCE:  This recovery rally is encouraging from a big picture perspective as it keeps the door open for our longer-term bullish mortgage rate bias to extend deeper into the summer months. Still, short-term scenarios should take caution. The past few days provide a perfect example of how quickly unfriendly corrections can occur in the mortgage market. Hopefully these back-ups illustrate why we normally urge defensive short-term stances, even as rates improve.  We may have dodged a bullet, but we're not out of the woods yet. More bouts of volatility are very possible.

CURRENT GUIDANCE:  There's a weird feeling in the air. Stocks are teetering on a major technical breakdown and bonds smell fear but are waiting for new guidance to be offered. If stocks fail to mount a recovery rally in the near future, we could be looking at another leg lower in Best Execution mortgage rates. While this "feeling" ties together well with our long-term outlook, it's still speculative in nature. We say that because the timing of such a move is "at any moment". And until it happens, stocks are gonna put up a fight. This "scratching and clawing" in equities implies the potential for loan pricing volatility remains high. Remember, it was only three days ago when Best Execution Mortgage Rates were teetering on a shift higher because stocks had put together a decent intraday rally effort. We may have dodged a bullet this week, but we're not out of the woods yet. The past few days provide a perfect example of how quickly unfriendly fluctuations can occur in the mortgage market.

What MUST be considered BEFORE one thinks about capitalizing on a rates rally?

   1. WHAT DO YOU NEED? Rates might not rally as much as you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough decisions?

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"Best Execution" is the most cost efficient combination of note rate offered and points paid at closing. This note rate is determined based on the time it takes to recover the points you paid at closing (discount) vs. the monthly savings of permanently buying down your mortgage rate by 0.125%.  When deciding on whether or not to pay points, the borrower must have an idea of how long they intend to keep their mortgage. For more info, ask you originator to explain the findings of their "breakeven analysis" on your permanent rate buy down costs.

Important Mortgage Rate Disclaimer: The "Best Execution" loan pricing quotes shared above are generally seen as the more aggressive side of the primary mortgage market. Loan originators will only be able to offer these rates on conforming loan amounts to very well-qualified borrowers who 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 recording. Don't forget the fiscal frisking that comes along with the underwriting process

After being stuck in the same spot for over a month, home loan borrowing costs shot higher today at their most violent pace since early February. Best-Execution mortgage rates moved up in the process.

This is the eventuality to which we've been referring with comments such as: "The risks associated with this range go back to the concept of "stored energy" in the bond market.  Think of it this way: the longer the market stays in limbo,  the faster rates will travel when the levee breaks and stored energy is released. That means if you are floating when stored energy is released, you are running the risk of losing your current quote."

To see just how much costs moved today relative to recent offerings, take a look at the chart we normally post each Friday.  It graphs the average origination closing costs associated with specific mortgage note rates as quoted by the five major mortgage lenders.

If the note rate line is moving up, the closing costs associated with that rate quote are rising. In December, closing costs rose rapidly. Mortgage rates did improve from those levels, but then moved sideways for 7-weeks. And then the range broke following the January Employment Situation Report and consumer rate quotes rose back to their December highs.  As one can see, borrowing costs have steadily improved afterward before running into a wall near the lows of the year.  Since then borrowing costs have slowly drifted higher before spiking today.

The spike is pretty obvious....

Each line represents a different 30 year fixed mortgage note rate.  The numbers on the right vertical axis are the origination closing costs, as a percentage of your loan amount, that a borrower would be required to pay in order to close on that note rate. If the note rate graph line is below the 0.00% marker, the consumer may potentially receive closing cost help from their lender in the form of a lender credits. If the note rate line is above the 0.00% marker, the consumer should expect to pay additional points at the closing table to cover permanent buydown costs and origination fees. PLEASE SEE OUR MORTGAGE RATE DISCLAIMER BELOW

UPDATED CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate MOVED HIGHER to 5.125% today after an extended period at 4.875%.  For those looking to permanently buy down their rate to 5.00%, this quote carries higher closing costs but  the upfront fee to permanently buy down your rate  to 5.00% is worth it to many applicants. We would generally only advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 5years.  Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is STILL 4.75%.  15 year fixed conventional loans are now best priced at 4.25%. Five year ARMS are stratified and there is more variation in what will be "Best-Execution" depending on your scenario.  We recommend break-even-analysis for several potential rates.

PREVIOUS GUIDANCE:  Even though borrowing costs moved more than average today, we're still in a sideways range.  The longer we go without getting a clear sense of market direction, the higher the risks involved in floating.  It's not that a longer waiting period automatically pressures rates higher, it just means the longer rates stay sideways, the more energy they store for their next movement up OR down.  Our guidance is unchanged: If you can't afford or don't want to take a risk, lock now because it might not get any better from CURRENT MARKET again.  If you've got time, flexibility, or otherwise are not in any particular rush or pressing need to lock your loan, we still think it's possible that rates make one more run lower in the months ahead. 

CURRENT GUIDANCE: Today's move in the Best-Execution rate could be a brief foray into unpleasant territory or merely the first day of a new trend of higher rates.  Though there's no way to know for sure if economic data or news headlines will show up any time soon to ease the pain, the possibility that they WON'T is enough for us to suggest the following: Until further notice, your decision to lock or float should assume that rates will get worse before they get better, if they get better.  Believe it or not, we are STILL able to conceive of a rates rally if the underlying bond markets are able to hold their ground at some important nearby levels.  We'll let you know if they do and point you in the direction of more detailed analysis if you want it, but for now, it's fair to say the lock bias has ticked up a notch in intensity.

One VERY IMPORTANT CAVEAT to any conversation about "Best-Execution" mortgage rates: Pricing is much more stratified than normal right now due to the recent changes in Loan-Officer Compensation. Because of this, the Best-Execution rate can vary greatly from lender to lender, and we advise doing a break-even-analysis on several available rates.

What MUST be considered BEFORE one thinks about capitalizing on a rates recovery?

   1. WHAT DO YOU NEED? Rates might not recover as much as you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not recover as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready for MORE VOLATILITY in the bond market.

"Best Execution" is the most efficient combination of note rate offered and points paid at closing. This note rate is determined based on the time it takes to recover the points you paid at closing (discount) vs. the monthly savings of permanently buying down your mortgage rate by 0.125%.  When deciding on whether or not to pay points, the borrower must have an idea of how long they intend to keep their mortgage. For more info, ask you originator to explain the findings of their "breakeven analysis" on your permanent rate buydown costs.

Important Mortgage Rate Disclaimer: The "Best Execution" loan pricing quotes shared above are generally seen as the more aggressive side of the primary mortgage market. Loan originators will only be able to offer these rates on conforming loan amounts to very well-qualified borrowers who 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 recording. Don't forget the intense fiscal frisking that comes along with the underwriting process.

After looking like they might improve this morning, home loan borrowing costs ended the day unchanged, making today the FIFTH consecutive session where loan pricing has remained the same or worsened by a thin margin. It’s like Groundhog Day in the bond market.

Today’s economic data and news headlines did very little to motivate investors.  Many market players seem to be waiting on the sidelines in preparation for their next move.  We’re hoping to see some semblance of activity in the last two days of the week.  Since the environment has been so similar from day to day, so too is our guidance.

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate is 4.875% after falling to 4.75% briefly last Wednesday (not universally, but in some cases).  For those looking to permanently buy down their rate to 4.75%, this quote carries higher closing costs but given the recent availability of 4.75% as a Best Execution rate, these costs may be lower than they previously were.  Still, the upfront cost of permanently buying down your rate  to 4.75% is not worth it to every applicant, we would generally only advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years.  Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is back to 4.75%. 15 year fixed conventional loans are best priced at 4.125%. Five year ARMS are best priced at 3.50%, but there is much more stratification in this sector with higher or lower rates making equally as much sense depending on the lender and on the amount of time you intend to keep the loan.

PREVIOUS GUIDANCE: In the absence of major headline news, the risky technical developments we mentioned yesterday prevented the bond market from making  positive progress today. No change to our recent stance that favors locking for short term/sensitive outlooks and allows for longer term/less urgent outlooks to wait for an additional recovery in mortgage rates. Tomorrow should be a busier session as it contains more economic data. READ MORE: Event Exhaustion Leaves Bond Market Waiting for Guidance

CURRENT GUIDANCE: No change to our recent stance that favors locking for short term/sensitive outlooks and allows for longer term/less urgent outlooks to wait for an additional recovery in mortgage rates. Thursday should be a busier session than Wednesday as it contains even more economic data.  Once again, the same link is in order: READ MORE: Event Exhaustion Leaves Bond Market Waiting for Guidance

Home loan borrowing costs moved slightly higher today. This is the fourth consecutive session where loan pricing has worsened by a thin margin. Best-execution mortgage rates were once again unchanged.

Today was not only light on the type of economic data that can move markets, but also on the breaking news headlines that have been dictating the direction of mortgage rates recently.  Trading activity was low, as were overall price shifts in the Secondary Mortgage Market.  Still,  mortgage-backed securities prices were slightly lower on the day, resulting in slightly higher consumer borrowing costs.

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate is 4.875% after falling to 4.75% briefly last Wednesday (not universally, but in some cases).  For those looking to permanently buy down their rate to 4.75%, this quote carries higher closing costs but given the recent availability of 4.75% as a Best Execution rate, these costs may be lower than they previously were.  Still, the upfront cost of permanently buying down your rate  to 4.75% is not worth it to every applicant, we would generally only advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years.  Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is back to 4.75%. 15 year fixed conventional loans are best priced at 4.125%. Five year ARMS are best priced at 3.50%, but there is much more stratification in this sector with higher or lower rates making equally as much sense depending on the lender and on the amount of time you intend to keep the loan.

CURRENT GUIDANCE: In the absence of major headline news, the risky technical developments we mentioned yesterday prevented the bond market from making  positive progress today. No change to our recent stance that favors locking for short term/sensitive outlooks and allows for longer term/less urgent outlooks to wait for an additional recovery in mortgage rates. Tomorrow should be a busier session as it contains more economic data. READ MORE: Event Exhaustion Leaves Bond Market Waiting for Guidance

Home loan borrowing costs got slightly more expensive today. Best-execution mortgage rates were unchanged.

News today that Treasury would begin selling its Mortgage-Backed-Security holdings took what was already a moderately weak morning and made it even weaker.  This is indicative of the challenges ahead this week.  Volatility notwithstanding, consumer borrowing costs could increase more before we find out if the rates recovery will continue.

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate is 4.875% after falling to 4.75% briefly last Wednesday (not universally, but in some cases).  For those looking to permanently buy down their rate to 4.75%, this quote carries higher closing costs but given the recent availability of 4.75% as a Best Execution rate, these costs may be lower than they previously were.  Still, the upfront cost of permanently buying down your rate  to 4.75% is not worth it to every applicant, we would generally only advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years.  Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is back to 4.75%. 15 year fixed conventional loans are best priced at 4.125%. Five year ARMS are best priced at 3.50%, but there is much more stratification in this sector with higher or lower rates making equally as much sense depending on the lender and on the amount of time you intend to keep the loan.

PREVIOUS GUIDANCE: Still very much "stuck" at a 4.875% best execution rate, but borrowers with long term outlooks or who are otherwise not in an urgent need to obtain a loan can afford to wait to see if rates become "unstuck" in a friendly direction.  It's still something we see as possible.  Short term outlooks or those who must lock soon regardless of market movements are in a different position, however.  Any time rates are near their best levels in over a month and you have to make a lock decision soon, risks are heavily in favor of locking.  Especially in this environment driven by headline news.  More volatility, less certainty = more reason to be defensive. READ MORE: Mortgage Pricing Hits Wall. Loan Demand Declines...

CURRENT GUIDANCE:  Headline-driven volatility continues to be a major factor in determining the direction of mortgage rates.  Meanwhile, technical developments in the Secondary Mortgage Market are creating bearish risks of their own.  No change to our recent stance that favors locking for short term/sensitive outlooks and allows for longer term/less urgent outlooks to wait for an additional recovery in mortgage rates.  But to reiterate, we think that in the short term, rates need to get a bit worse before they could get better in the longer term. 

ECON CALENDAR: THE WEEK AHEAD

(In reality the calendar of planned events will probably matter less in the days ahead. It's what hasn't happend yet in Japan/Libya/Mideast that matter most.)

Mortgage rates got slightly more expensive today. Best-execution rates were unchanged.

It was a quiet session overall. Little movement was seen in the secondary mortgage market.  Stocks started strong, bonds opened weak. Both then reversed course and meandered back toward unchanged levels on the day. It was a quiet day. The slowdown wasn't unwelcome though....

While mostly overlooking a dense economic calendar this week, investors were forced to base their trading behavior on breaking news headlines and events. Mortgage rates benefited from a "flight to safety", but it was a roller coaster ride.  There were large spikes and big drops. An abundance of chaos if you will.  The market needed a break. And we think that break began yesterday, on St.Patrick's Day.   It won't last long though. Much of the storyline has yet to develop in Japan, Northern Africa, and the Middle East. Thus we'd expect breaking headline news to dictate the direction of mortgage rates next week too.

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate is BACK to 4.875% after falling to 4.75% on Wednesday (not universally, but in some cases).  For those looking to permanently buy down their rate to 4.75%, this quote carries higher closing costs but given the recent availability of 4.75% as a Best Execution rate, these costs may be lower than they previously were.  Still, the upfront cost of permanently buying down your rate  to 4.75% is not worth it to every applicant, we would generally only advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years.  Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is back to 4.75%. 15 year fixed conventional loans are best priced at 4.125%. Five year ARMS are best priced at 3.50%, but there is much more stratification in this sector with higher or lower rates making equally as much sense depending on the lender and on the amount of time you intend to keep the loan.

Mortgage rates worsened today. 

The level of panic lessened overnight in Japan, and despite several somewhat alarming headlines, the overall panic in the markets was not on par with that seen yesterday and the day before.  The situation seemed dire enough for bond markets to move to territory that allowed an exploratory run of a 4.75% Best Execution rate yesterday, but on today's moderation, we're right back to the long-standing "stuck spot" at 4.875.  In short, markets began to reverse some of the flight-to-safety that had benefited rates over the past two days.

UPDATED CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate IS BACK to 4.875% after falling to 4.75% yesterday (not universally, but in some cases).  For those looking to permanently buy down their rate to 4.75%, this quote carries higher closing costs but given the recent availability of 4.75% as a Best Execution rate, these costs may be lower than they previously were.  Still, the upfront cost of permanently buying down your rate  to 4.75% is not worth it to every applicant, we would generally only advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years.  Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is back to 4.75%. 15 year fixed conventional loans are best priced at 4.125%. Five year ARMS are best priced at 3.50%, but there is much more stratification in this sector with higher or lower rates making equally as much sense depending on the lender and on the amount of time you intend to keep the loan.

PREVIOUS GUIDANCE:  The loan pricing buydown barrier has been broken, but the bond market hasn't committed to a sustained rally (NEED 4.0 MBS COUPONS). A "flight to safety" help us get here, that means mortgage rates are still at the mercy of headlines and a constant "flight to safety". This move could be brief or it could be the start of a sustained interest rates rally. Wait and see....

CURRENT GUIDANCE:  Guess what!  We didn't have to wait long to see the potential move referenced above was indeed "brief".  There's still plenty of uncertainty that could cause rates to make another attempt to move down to a 4.75% Best Execution, but we feel that those sorts of gambits are best reserved for borrowers with longer term outlooks or who are otherwise less sensitive to rate movements and/or who may not be in an urgent need to refinance.  Any time rates are near their best levels in over a month, it's always advisable for short term outlooks or those who are sensitive to movement in rates and costs to favor locking.  We're still on a fence between where we've been and where we might be able to go, but getting there is uncertain.

Mortgage rates improved today as the situation in Japan deteriorated and a feeling of panic poured through global markets, spurring on another flight to safety in risk-averse government bonds.

UPDATED CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate HAS IMPROVED to 4.75%.  This quote is not widespread though. If you are not seeing this rate, your lender should at least be sharing closing cost credits for 4.875% (see disclaimer below).  For those looking to permanently buy down their rate to 4.625%, this quote carries expensive closing costs. The upfront fee to permanently buy down your rate  to 4.625% is not worth it to every applicant. We would generally advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years.   Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30-year fixed "Best Execution" has improved to 4.625%. Some lucky borrowers may even see 4.50%, but those quotes are not widespread at all. They are actually "phantom".  If your FHA rate is still 4.75%, your lender should be offering closing cost assistance.  15-year fixed conventional loans are best priced at 4.125%, but some lenders may be quoting 4.00%. Five year ARMS are still best priced at 3.50%.

NOTE: The primary mortgage market is very segmented at the moment because of a pending shift lower in the production mortgage-backed security coupon (in the secondary mortgage market). Lenders were able to improve loan pricing today without a major hedging adjustments because of "Excess Servicing" values. If mortgage rate improvements are to be more consistent, lenders will have to hedge their loan pipelines with 4.0 MBS coupons. We are not seeing that yet.

CURRENT GUIDANCE:  The loan pricing buydown barrier has been broken thanks to excess loan servicing values, but the bond market hasn't committed to a sustained rally (NEED 4.0 MBS COUPONS). A "flight to safety" help us get here, that means mortgage rates are still at the mercy of headlines and a constant "flight to safety".

Plain and Simple:  This move could be brief or it could be the start of a sustained interest rates rally. Wait and see....

CURRENT MARKET: The "Best Execution" conventional 30 year fixed mortgage rate is still 4.875%.  For those looking to permanently buy down their rate to 4.75%, this quote carries higher closing costs. The upfront cost of permanently buying down your rate  to 4.75% is not worth it to many applicants, we would generally only advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years. There are some lenders offering competitive closing costs on 4.75%, but those instances are few and far between.  Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is still 4.75%. 15 year fixed conventional loans are best priced at 4.125%. Five year ARMS are still best priced at 3.50%.

NOTE: Although Best Execution rates did not improve today, the closing costs associated with these quotes did decline. With the exception of conventional 15-year loans, borrowers who meet the requirements in the disclaimer below should receive closing cost help from their lender on Best Execution quotes.

CURRENT GUIDANCE: Although early trading seemed to suggest mortgage rates were in the process of becoming "UNSTUCK," an unfriendly correction ensued in the afternoon hours that led to losses which suggest bond markets are still not committed to a sustained rally. Yet.  This leaves us very much on a fence. Our intermediate outlook is for lower rates but short term decision makers must consider that mortgage rates are as aggressive as they've been all year.

Plain and Simple: We're going to need a sustained bond market rally to see "Best Execution" break through the 4.875% barrier. Otherwise this is as good as it gets.