Mortgage Rates Hold Near Top of Range, Pay or Not Pay Points
Posted 11-10-2009 at 07:38 AM by VictorBurek
Despite a large rally in the stock market, the prices of mortgage backed securities moved slowly but steadily higher yesterday. No economic data was released but helping the move higher was a very strong auction of 3 year treasury notes. Even though our nation is borrowing money at record pace, demand for our debt has remained very strong which has helped to keep mortgage rates at or near record low levels. A few lenders did reprice for the better as the gains held through close.
Like yesterday, today is a data free day; however, we do have a few Fed officials speaking which can have an effect on the markets. First, Atlanta Federal Reserve Bank President Dennis Lockhart will speak about the economy to the Urban Land Institute conference in Atlanta. Next, San Francisco Federal Reserve Bank President Janet Yellen will speak to the Lambda Alpha International on the economy and real estate. Finally, Dallas Federal Reserve Bank President Richard Fischer will speak in Austin on economic outlook.
At 1pm eastern we have another round of treasuries being offered. Today, the U.S. Department of Treasury will auction $25billion in 10 year notes to the highest bidder. If the trend of strong demand for our nation’s debt continues, MBS should be able to hold in the current range.
Early reports from fellow mortgage professionals indicate mortgage rates to be unchanged from yesterday. This keeps the par 30 year conventional rate mortgage in the 4.75% to 5.00% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, the par rate is holding at 4.25% to 4.50% with similar costs.
I get asked quite often, should I pay a point or pay no points. My advice is to always get a quote with you paying just closing costs and one where you are paying the closing costs including one point. With the two quotes, look at the difference in closing costs and the difference in payment and determine a breakeven point. For example, let’s say you are doing a $200,000 loan and the closing costs are $3000 with no points and $5000 with a point. Lets also say that the difference in the payment between the two quotes is $30 per month. Take the cost difference of $2000 and divide by the monthly payment difference of $30 to get a breakeven point which in this case is 66 months. If you plan on keeping the home for a longer period of time, than it is wise to pay the additional costs to secure a lower rate. If you plan on keeping the home for a shorter period, than it is better to pay less costs and secure the higher interest rate. This example does not take into account the tax deductibility of the point paid which would reduce the breakeven point.
Feel free to ask questions in the comment section below.
Like yesterday, today is a data free day; however, we do have a few Fed officials speaking which can have an effect on the markets. First, Atlanta Federal Reserve Bank President Dennis Lockhart will speak about the economy to the Urban Land Institute conference in Atlanta. Next, San Francisco Federal Reserve Bank President Janet Yellen will speak to the Lambda Alpha International on the economy and real estate. Finally, Dallas Federal Reserve Bank President Richard Fischer will speak in Austin on economic outlook.
At 1pm eastern we have another round of treasuries being offered. Today, the U.S. Department of Treasury will auction $25billion in 10 year notes to the highest bidder. If the trend of strong demand for our nation’s debt continues, MBS should be able to hold in the current range.
Early reports from fellow mortgage professionals indicate mortgage rates to be unchanged from yesterday. This keeps the par 30 year conventional rate mortgage in the 4.75% to 5.00% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, the par rate is holding at 4.25% to 4.50% with similar costs.
I get asked quite often, should I pay a point or pay no points. My advice is to always get a quote with you paying just closing costs and one where you are paying the closing costs including one point. With the two quotes, look at the difference in closing costs and the difference in payment and determine a breakeven point. For example, let’s say you are doing a $200,000 loan and the closing costs are $3000 with no points and $5000 with a point. Lets also say that the difference in the payment between the two quotes is $30 per month. Take the cost difference of $2000 and divide by the monthly payment difference of $30 to get a breakeven point which in this case is 66 months. If you plan on keeping the home for a longer period of time, than it is wise to pay the additional costs to secure a lower rate. If you plan on keeping the home for a shorter period, than it is better to pay less costs and secure the higher interest rate. This example does not take into account the tax deductibility of the point paid which would reduce the breakeven point.
Feel free to ask questions in the comment section below.
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