Following yesterday's abrupt move higher, home loan borrowing costs spent the day feeling out their new range.  Best-Execution mortgage rates and borrowing costs were unchanged today.

For a visual representation of the spike in consumer borrowing costs, take a look at THIS CHART.

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate has risen to 5.125% after spending an extended period stuck at 4.875%.  For those looking to permanently buy down their rate to 5.00%, this quote carries higher closing costs but  the upfront fee to permanently buy down your rate  to 5.00% is worth it to applicants who plan to keep their new mortgage outstanding 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 STILL 4.75%.  15 year fixed conventional loans are now best priced at 4.25%. Five year ARMS are stratified and there is more variation in what will be "Best-Execution" depending on your scenario.  We recommend break-even-analysis for several potential rates.

One VERY IMPORTANT CAVEAT to any conversation about "Best-Execution" mortgage rates: Pricing is much more stratified than normal right now due to recent regulatory changes in Loan Officer Compensation policies. Because of this, the Best-Execution mortgage rate can vary greatly from lender-to-lender. We advise requesting a break-even-analysis if you plan to pay points at closing.

PREVIOUS GUIDANCE:  Today's move in the Best-Execution rate could be a brief foray into unpleasant territory or merely the first day of a new trend of higher rates.  Though there's no way to know for sure if economic data or news headlines will show up any time soon to ease the pain, the possibility that they WON'T is enough for us to suggest the following: Until further notice, your decision to lock or float should assume that rates will get worse before they get better, if they get better.  Believe it or not, we are STILL able to conceive of a rates rally if the underlying bond markets are able to hold their ground at some important nearby levels.  We'll let you know if they do and point you in the direction of more detailed analysis if you want it, but for now, it's fair to say the lock bias has ticked up a notch in intensity.

CURRENT GUIDANCE: Yesterday's move higher in Best-Execution mortgage rates could be a brief foray into unpleasant territory or merely the beginning of a new trend of higher rates. Though there's no way to know for sure if economic data or news headlines will show up any time soon to ease the pain, the possibility that they WON'T is enough for us to suggest the following: Until further notice, your decision to lock or float should assume that rates will get worse before they get better, if they get better. Believe it or not, we are STILL able to conceive of a rates rally if the underlying bond markets are able to hold their ground at some important nearby levels. We'll let you know if they do and point you in the direction of more detailed analysis if you want it, but for now, it's fair to say the lock bias has ticked up a notch in intensity.

What MUST be considered BEFORE one thinks about capitalizing on a rates recovery?

   1. WHAT DO YOU NEED? Rates might not recover as much as you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not recover as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready for MORE VOLATILITY in the bond market.

"Best Execution" is the most efficient combination of note rate offered and points paid at closing. This note rate is determined based on the time it takes to recover the points you paid at closing (discount) vs. the monthly savings of permanently buying down your mortgage rate by 0.125%.  When deciding on whether or not to pay points, the borrower must have an idea of how long they intend to keep their mortgage. For more info, ask you originator to explain the findings of their "breakeven analysis" on your permanent rate buydown costs.

Important Mortgage Rate Disclaimer: The "Best Execution" loan pricing quotes shared above are generally seen as the more aggressive side of the primary mortgage market. Loan originators will only be able to offer these rates on conforming loan amounts to very well-qualified borrowers who have a middle FICO score over 740 and enough equity in their home to qualify for a refinance or a large enough savings to cover their down payment and closing costs. If the terms of your loan trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will be higher. If you do not fall into the "perfect borrower" category, make sure you ask your loan originator for an explanation of the characteristics that make your loan more expensive. "No point" loan doesn't mean "no cost" loan. The best 30 year fixed conventional/FHA/VA mortgage rates still include closing costs such as: third party fees + title charges + transfer and recording. Don't forget the intense fiscal frisking that comes along with the underwriting process.