Mortgage rates spent most of last week in recovery mode after experiencing a sharp spike in late-June/early-July. Unfortunately just before the weekend the corrective rally stalled and positive progress came to a screeching halt, leaving hopeful rate watchers once again stuck in limbo.

In the chart of Consumer Rate Quotes below, a sharp spike followed by an immediate recovery (last week) can be seen. If the line is moving up, closing costs are rising.  If the line is moving down, costs are getting cheaper. 

The chart above compares the average origination costs (as a percentage of loan amount) for several available mortgage note rates as quoted by the five major lenders. Each line represents a different 30 year fixed mortgage note rate.  The numbers on the right vertical axis are the origination closing costs, as a percentage of your loan amount, that a borrower would be required to pay in order to close on that note rate. If the note rate graph line is below the 0.00% marker, the consumer may potentially receive closing cost help from their lender in the form of a lender credits. If the note rate line is above the 0.00% marker, the consumer should expect to pay additional points at the closing table to cover permanent buydown costs and origination fees. PLEASE SEE OUR MORTGAGE RATE DISCLAIMER BELOW 

CURRENT MARKET*: The "Best Execution" conventional 30-year fixed mortgage rate is 4.625%.  When taking into account loan pricing improvements awarded last week, some lenders are once again offering 4.50%.  On FHA/VA 30 year fixed "Best Execution"  is 4.375% and in some cases 4.25% is on the table. FHA quotes at 4.50% are widespread.  15 year fixed conventional loans are best priced at 3.75%. Five year ARMs are still best priced at 3.25% but the ARM market is more stratified and there is more variation in what will be "Best-Execution" depending on your individual scenario. 

CURRENT GUIDANCE:  Floating in this environment is a crapshoot. Both stocks and bonds are maneuvering through major market uncertainties. And the week ahead holds little new economic data, leaving market participants to focus on news headlines regarding U.S. budget issues, EU debt contagion concerns, and financial earnings. That puts the direction of mortgage rates at the mercy of factors which don't exactly adhere to schedules or expectations. Yes there's still room to float longer term deals, but if home loan borrowing costs start to rise in the near future, it won't be long before Best Execution rate quotes are being pressured higher, making us more inclined to advise locking short-term floats (those that must lock in less than 15 days). 

FULL ECON AND EVENTS CALENDAR

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BEWARE: MND guidance is speculative in nature. We don't have a crystal 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 you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough decisions?

*Best Execution is the most cost 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 buy down 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 fiscal frisking that comes along with the underwriting process.