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Tuesday, June 25, 2013

WARNING: Mortgage Rates Jump Almost 1% In One Week!

If you have not heard, over the past 5 days, mortgage rates have skyrocketed!  In the past week, from Thursday 6/13  to Friday 6/21, interest rates have jumped one half to three quarters in RATE with eight mid-day price changes.  To give you an idea how dramatic that is, on Thursday 6/13, I could have locked in a buyer for 30 days on an FHA loan with no loan origination fee at 3.75%.  Today, that same rate would cost the buyer 1% origination plus 2.375% in a buy-down fees.  Or to put it another way, on a $200,000 loan that’s a difference of $6750 in additional loan fees to obtain the same rate from last week!   Now, the same “no origination fee” FHA loan interest rate is sitting at 4.5%.  So on a 200,000 loan amount, a 4.5 rate versus a 3.75 rate, the monthly payment increases by nearly $90/mo.  This is equivalent to almost $18,000 lower purchase price to keep the same monthly payment.
 
Do you have a trusted lender helping you with your purchase?  Consider one of the best lending teams in town, James Nesbit and Jeff Bohl of Republic Mortgage Home Loans.

REPUBLIC MORTGAGE HOME LOANSTumwater Branch |  NMLS# 3148
360.236.9777   office
jnesbit@republicmortgage.com
jbohl@republicmortgage.com

300 Deschutes Way SW, suite 315
Tumwater, WA 98501
 
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Jun 21 2013, 3:49PM

Mortgage News Daily


Nightmare for Mortgage Rates: Way Worse Than Freddie Told You

Mortgage rates have had a far worse week than you've been told anywhere else, and today was even more freakishly destructive than the previous two days. Taken together, this is the worst week for mortgage rates we have on record. Today is one of two times in the past 10yrs where the average borrowing rate for top tier scenarios moved up by at least a quarter of a point. A quarter of a point may not sound like much, but in terms of day-to-day movements in 30yr fixed mortgage rates, it's catastrophic. That leaves best execution rates at a stomach-churning 4.625% today.

PLEASE UNDERSTAND, this is real. Freddie Mac may have been out yesterday with the industry's most commonly cited benchmark for weekly rate movements, but this is merely an average that's tallied through Wednesday. Thursday took rates another eighth to quarter higher and today took rates another quarter higher again. If you're a consumer staring at a rate quote in disbelief, or a Loan Originator who doesn't happen to be a member of MBS Live, please know that today's movements are very real and very justified based on the price movements in MBS.

This movement will eventually end. It could be Monday or rates could go higher all next week. The assessment today is exactly the same as it was yesterday: We'd like to say "we've moved high enough, fast enough that we'll probably be able to dig in and hold some ground here," but that's not safe yet. Market participants themselves, let alone mortgage lenders, are still feeling out the post-Fed-Announcement environment. There's no reason rates can't go even higher just because they've moved so high, so fast.

On a personal note, I know the emotions that tend to accompany times like this can border on overwhelming. If the perspective helps, try to look at your options in terms of payments and costs instead of rates themselves. If you're a consumer, understand that your loan originator is actually every bit as traumatized by this week as anyone, and that no one saw a move quite this big happening quite this fast. Work together to quickly examine what the options are and assess the trade-offs between scenarios.

Look at different terms, different loan types, different levels of buy down (contrary to misguided popular belief, "points" are not a bad thing. Just understand that they amount to a choice between paying interest now or later). Some borrowers may want to pay more closing costs right now in order to get to the payment they can afford. Ultimately it's your choice as to what works best for you, but the message is that we're all in this together, and we're all ultimately working toward the same goals.

Loan Originator Perspectives

"If you are a consumer, and you are shopping rates between lenders, I'd advise you to pick the lender you are most comfortable with, move forward with them and lock your rate in. I have a customer that has been going back and forth between another lender and myself since last week, over a few hundred dollars, and his rate has now gone from 4.125%, with a $1500 credit, to 4.5% with no credit! Find someone you like and that is giving you a competitive offer, and lock it in. Who knows where things ride stops!" -Jason York, VP of VA Operations, Prime Mortgage Lending

"We continue to see constant capitulation in longer term treasuries and complete annihilation of MBS. It would be nice to paint a picture of a possible rebound but obviously all bets are off. The free capitalistic market has to work its way through layers of artificial technical and determine where it needs to be. It's similar to the concept of a fire in a movie theater, everyone gets trampled during the stampede. Floating is a losers game if closing within 30 days, 45-60 should consider locking as well, as time value has not been an element of success." -Constantine Floropoulos, Quontic Bank

"As of this afternoon, rates are up about 1.25% from record lows, but if this levels off for awhile, it won't choke off housing or a broader recovery. It's been a brutal week, but not time to panic yet about the rate spike causing broader economic turmoil. " -Julian Hebron, Branch Manager, RPM Mortgage

"I picked a good week to go on a short vacation. Big Ben has not helped mortgage rates or bond markets at all. Stock market isn't thrilled either. My advice to any consumer is lock now because rates aren't coming back down without a total melt down in stocks and some sort of tape bomb from left field. If you were on the fence for a refinance, you can climb down and go home because whatever you were waiting for is never coming back. Purchasers would be wise to lock asap too." -Mike Owens, Partner, Horizon Financial Inc.

Ongoing Lock/Float Considerations

  • After rising consistently from all-time lows in September and October 2012, rates challenged the long term trend higher, but failed to sustain a breakout
  • Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
  • Fears about the Fed's bond-buying intentions were proven well-founded on May 22nd when rates rose to 1yr highs after the Fed indicated their intention to taper bond buying programs sooner vs. later
  • The June 19th FOMC Statement and Press Conference confirmed the suspicions. Although tapering wasn't announced, the Fed made no move to counter the notion that they will decrease bond buying soon if the economic trajectory continues
 



Jun 20 2013, 6:30PM


Worst 2-Day Move For Mortgage Rates in 4 Years

Mortgage rates are reprising past trauma, now matching the scope of the late 2010 sell-off, with the past two days matching the scope of Black Wednesday's sell-off. "Selling" in this case, refers to the Mortgage-Backed-Securities (MBS) that most directly affect rates. As MBS prices fall, rates rise. The faster this happens, the worse it is for rate sheets, and despite the month and a half of selling, the past two days have been surprisingly abrupt for lenders. Rate sheets have taken the most profound hits we've seen on back to back days (past examples were more concentrated on one of the two days). Conventional 30yr Fixed best-execution is quickly up to a staggering 4.375%-4.5%, though we'd note that there's even more variation between lenders as volatility magnifies the effects of different pricing strategies.

Today's economic data had precious little effect on trading levels, adding to the sense that it's going to take official employment data on July 5th, a change in tone from the Fed, or an unexpected tape-bomb style headline to convince markets that the Fed won't begin curtailing asset purchases in September. While that continues to be the case, interest rate movements continue to be a risk. We'd like to say "we've moved high enough, fast enough that we'll probably be able to dig in and hold some ground here," but that's not safe yet. Market participants themselves, let alone mortgage lenders, are still feeling out the post-Fed-Announcement environment. There's no reason rates can't go even higher just because they've moved so high, so fast.

Ongoing Lock/Float Considerations

  • After rising consistently from all-time lows in September and October 2012, rates challenged the long term trend higher, but failed to sustain a breakout
  • Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
  • Fears about the Fed's bond-buying intentions were proven well-founded on May 22nd when rates rose to 1yr highs after the Fed indicated their intention to taper bond buying programs sooner vs. later
  • The June 19th FOMC Statement and Press Conference confirmed the suspicions. Although tapering wasn't announced, the Fed made no move to counter the notion that they will decrease bond buying soon if the economic trajectory continues
  • (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario. There are many reasons a quoted rate may differ from our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).

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