Posts Tagged ‘Treasury Auction’

Mortgage rates continue to enjoy a period of relief after rising rapidly in recent weeks.  The extent to which this relief period matures into a more extended and stable mortgage rate rally is still undecided, but at least now it's possible.  Those looking to stay as protected as possible even during potentially more favorable times still need to keep an eye out for the risks that crop up along the way.  We discuss the current risks in the "New Guidance" section below.

CURRENT MARKET: The "Best Execution" conventional 30 year fixed mortgage rate is 5.00%.  There is an opportunity to lock 4.875% for those who wish to buy down their rate, but this quote carries higher closing costs than 5.000%. The upfront cost of permanently buying down your rate from 5.000 to 4.875% may not be worth it to every applicant. We would generally advise the permanent floatdown if you plan to hold your new mortgage for longer than the next 5 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 4.75%. 15 year fixed conventional loans are best priced between 4.125% and 4.25%. Five year ARMS are best priced between at 3.625 and 3.75%.

PREVIOUS GUIDANCE:  A flight to safety* poured into the bond market today. This allowed lenders to improve loan pricing on first releases of rate sheets. Positive progress lasted throughout the day and many lenders were able to reprice for the better.  As a result "Best Execution" mortgage rates have moved lower.   Although we remain defensive, we are seeing signs that imply mortgage rates are due further improvements. The secondary mortgage market rally is however still quite immature and our confidence level has only improved modestly. READ MORE <--- You must read this post if you are thinking about floating for lower mortgage rates.

NEW GUIDANCE: Despite some weakness in the overall bond market, mortgage rates were able to maintain the improvements seen yesterday.  This is a positive sign considering a relatively weak Treasury auction occurred today, and that would normally have a negative impact on the rates outlook.  The market is certainly THINKING about shifting back into a more rate-friendly stance, but that remains up-in-the-air to a certain extent.  Additionally, there is another treasury auction tomorrow, and if that goes as poorly as today's did, we'd likely lose a bit of ground in the form of increasing closing costs to obtain a similar best execution rate.