Mortgage Rates Move Off Record Lows as Rally Exhausts

Mortgage rates rallied to new all-time lows yesterday following a few disappointing housing headlines. While it has been no secret to housing industry professionals, the post-homebuyer tax credit hangover appears to have caught some folks on Wall Street off-guard. Stocks sold off, interest rates rallied and lender rate sheets were the most aggressive we've ever seen them. I locked all the loans in my pipeline.


We've had a great run over the past few days. MBS prices hit new all-time highs yesterday. Loan pricing was the most aggressive we've ever seen it. Lenders were practically begging for borrowers to lock their loans. Unfortunately the rally lost some steam today. Nothing seems to have caused it, but lenders repriced for the worse and mortgage rates increased this afternoon. I think the best way to describe the move higher is "rally exhaustion". Prices were just too high and profits were taken.

Reports from fellow mortgage professionals indicate lender rate sheets to be worse than yesterday after lenders repriced for the worse today. Higher mortgage borrowing costs will most noticeable via an increase in discount points. The par 30 year conventional rate mortgage remains in the 4.375% to 4.625% range for well qualified consumers. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you plan to stay in your home for less than 3 years, you should consider a no cost refinance which offers a rate of around 4.875% today. You pay no upfront fees and no fees are rolled into the mortgage. The loan originator pays your closing costs for you by giving you a higher interest rate which pays the loan originator on the back side.

Mortgage rates are ridiculously aggressive right now. I favor locking all loans.

Rate Lock Advisory - Friday Jun. 25th (Friday's bond market has opened flat after this morning's economic data brought no significant surprises)

Rate Lock Advisory - Friday Jun. 25th

Friday's bond market has opened flat after this morning's economic data brought no significant surprises. The stock markets are also relatively calm with the Dow down 4 points and the Nasdaq down 3 points. The bond market is nearly unchanged from yesterday's close, but we will still likely see an increase of approximately .125 of a discount point in this morning's mortgage rates due to weakness late yesterday.

Yesterday's 7-year Treasury Note auction actually went fairly well, especially when compared to Wednesday's 5-year sale. However, the bond market wasn't too impressed and we saw some lenders revise rates upward yesterday afternoon. Many may have chosen to reflect that revision in today's rates, but overall we should see a slight increase compared to yesterday's morning rates.

There were two economic reports posted this morning, but neither is considered highly important. The first was the final reading to the 1st Quarter Gross Domestic Product (GDP) that came in at 2.7% annual rate of growth. This was a downward revision from the previous estimate, which is good news for bonds and mortgage rates. It means that the economy did not grow as much as previously thought during the first three months of the year. Unfortunately, this data is too old to have much influence on the markets and mortgage rates or we would have likely seen an improvement in today's rates.

The second report of the day was the University of Michigan's revision to their Index of Consumer Sentiment. It revealed a reading of 76.0, up from the preliminary reading of 75.5. That means surveyed consumers were a little more optimistic about their own financial situations than they were earlier this month and they may be slightly more willing to make large purchases in the near future. Ideally, a downward revision would have been preferred, but it was not enough of a change to affect this morning's mortgage rates.

Next week is busy with relevant economic reports scheduled for release every day except Wednesday. Monday does bring us some fairly important data when May's Personal Income and Outlay figures will be posted. The week closes with the almighty Employment report Friday, but there is some fairly important reports being released in between. Look for more details on next week's events in Sunday's weekly preview.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.