Yesterday, we noted pressure building on BestExecution rates.  Today, things boiled over unfavorably and the loan pricing losing streak extended into a fourth day.  Mortgage Rates got hit hard enough that yesterday's quotes may not even be available today without additional closing costs.

Our ongoing guidance recently has been to take advantage of recent rate offerings as soon as possible, noting that "the frustration of missing out on "high 3's" and instead getting "low 4's" seems nowhere near as bad as the frustration of missing out on a refi opportunity (moving from 5% to 4.25% for instance) altogether."  That turns out to be pretty prophetic as you'll be lucky to see BestExecution at 4.25% today. 

CURRENT MARKET*: The Best Execution 30-year fixed mortgage rate is now 4.25% to 4.375% depending on your lender/scenario.  Several lenders are still willing to offer lower rates, but those quotes carry with them additional closing costs.  On FHA/VA 30 year fixed Best Execution rose from what had been a solid 4.0% to 4.25% today.  Deals can be structured with lower rates, but again, you'll pay more for those, so make sure you assess the time it takes to break-even on the extra expense.  15 year fixed conventional loans are best priced at 3.625%. Five year ARMs are still best priced at 3.25. ARMs seem to have bottomed out. 

A note on the greater-than-normal variation in rate offerings between lenders.  There is an increased amount of variety in what individual lenders are now quoting as their BestExecution rates.  This is a factor of price volatility in the secondary mortgage market. Unfortunately when volatility picks up in the secondary mortgage market, the cost of doing business gets more expensive for lenders (hedging costs go up). Those added costs are usually passed down to consumers via extra margin in rate sheets.  Additionally, the recent rates rally makes lenders busy enough that some control their inbound volume by raising rates regardless of the secondary mortgage market in order to discourage new applications/locks.

GUIDANCE: Rates are on the rise and you missed or passed on the opportunity to lock, and now wondering what to do?  A couple things to keep in mind.  With 30 yr rates in the low 4's, there's still plenty of opportunity from a long term standpoint.  You just might be paying more for it.  This assumes either that rates will keep rising or that your hands are otherwise tied.  Today is a grey area between floating and locking for those with longer time horizons or more flexibility to losses.  For instance, someone with a 5.125% rate currently, and no need to refi would be more flexible than someone buying a home who had to lock quickly.  Whatever the case, the best chance for near-term reprieve is in the wake of Friday's High-Risk-Event when Bernanke gives his annual speech at Jackson Hole.  Risky to hope for that, but a possible break in the recently gloomy mortgage rate clouds.  Bottom line though, if this move up panicked you, and your quote still makes sense, why risk losing it altogether?

MORE GUIDANCE: Refi Roadmap: A Locked Rate Isn't a Closed Loan <-- must read

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*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 30year 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

CAUTION: 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?