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Mortgage Rates: Even More Nuts!

We've used the word "nuts" in the past to describe extra volatile movements in the mortgage market, but today takes the cake. Many market records were broken followingtoday's Federal Reserve FOMC meeting. The net effect was positive for consumer borrowing costs...

CURRENT MARKET*: The BestExecution 30-year fixed mortgage rate is still4.250%. More lenders are however willing to offer 4.00% and 4.125% is approaching BestExecution status. On FHA/VA 30 year fixed BestExecutionis 4.00%. Few lenders are willing to quote 3.875% without extra closingcosts. 15 year fixed conventional loans are still best priced at 3.75%and we're still seeing aggressive quotes at 3.625%. Five year ARMs are stillbest priced at 3.25. ARMs and 15 year quotes seem to have bottomed out.

It's important that we point out anincreased amount of variation in what individual lenders are quoting as theirBestExecution rates. This is a factor of price volatility in the secondarymortgage market. Unfortunately when volatility picks up in thesecondary mortgage market, the cost of doing business gets more expensive forlenders (hedging costs go up). Those added costs are usually passed down toconsumers via extra margin in rate sheets.

GUIDANCE: We've realized a good portion of the rates rally we'd beenholding out for plus more. But believe it or not, we're still not at "all timehighs." There's room for improvement in the primary mortgage market as lenders have no passed along gains to their fullest extent. This is a factor of extra volatility in bond markets. Mortgage rates DO NOT like volatility. Relative to various market levels, rate sheets areconservative yes, but there's no telling when things will get better, andsadly, always a chance that they won't get better at all. Incidentally,we lean toward the possibility of them getting better, but the timing andflexibility required to capitalize on that possibility makes floating a lessattractive choice for most scenarios right now, especially when what's on thetable is already so much better than everything else 2011 has to offer andfairly darn close to all time low rates.

CAUTION: MND guidance is speculative in nature. We don't have acrystal ball, we can't predict the future, we can only share our outlook.Making the following considerations extra important........................

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 youwant/need.
2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as youwant/need.
3. HOW DO YOU HANDLE STRESS? Are you ready to make toughdecisions?

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*BestExecution is themost cost efficient combination of note rate offered and points paid atclosing. This note rate is determined based on the time it takes to recover thepoints you paid at closing (discount) vs. the monthly savings of permanentlybuying down your mortgage rate by 0.125%. When deciding on whether or notto pay points, the borrower must have an idea of how long they intend to keeptheir mortgage. For more info, ask you originator to explain the findings oftheir "breakeven analysis" on your permanent rate buy down costs.