Mortgage Rates

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by Matthew Graham
Mortgage Rates: Reprieve Gone. Opportunities Remain

After a brief but sizeable rebound on Friday, Mortgage Rates experienced an equally sizeable rebound back higher, though we hope it will be equally brief.

Markets suffered from a pronounced lack of activity today with numerous participants out of commission due to Irene as well as some overseas markets on Holiday. All in all stocks rallied significantly and interest rates rose.

CURRENT MARKET*: The BestExecution 30-year fixed mortgage rate has moved BACK UP to 4.25% and in some cases 4.375%. Several lenders are willing to offer lower rates, but those quotes carry with them additional closing costs. On FHA/VA 30 year fixed BestExecution moved BACK UP to 4.25%. Deals can be structured with lower rates, but again, you'll pay more for those, so make sure you assess the time it takes to break-even on the extra expense. 15 year fixed conventional loans are best priced at 3.625%. Five year ARMs are still best priced at 3.250%. ARMs seem to have bottomed out.

A note on the greater-than-normal variation in rate offerings between lenders. There is an increased amount of variety in what individual lenders are now quoting as their BestExecution rates. This is a factor of price volatility in the secondary mortgage market. Unfortunately when volatility picks up in the secondary mortgage market, the cost of doing business gets more expensive for lenders (hedging costs go up). Those added costs are usually passed down to consumers via extra margin in rate sheets. Additionally, the recent rates rally makes lenders busy enough that some control their inbound volume by raising rates regardless of the secondary mortgage market in order to discourage new applications/locks.

GUIDANCE: Two things... First of all, locking in here still makes lots of sense for lots of scenarios considering our overall nearness to all-time lows. The guidance from any of our recent posts holds true there. That said, due to the insane lack of market participation today, you may see a brief improvement in rate sheets that could net the aggressive floater an extra eighth of a percent in rate, and while there's no guarantee we'll see this, it's the first time in a long time that a short term float strategy seems to make any sort of sense. Friday remains high risk owing the the Employment Situation Report, so if you're not locked up by Thursday, you're at the whim of Friday's jobs data.