Mortgage Rates Reach New Lows
Posted 10-07-2010 at 08:19 AM by VictorBurek
Mortgage rates extended their rally to a third day yesterday. Many lenders were offering rates below 4% for a 30 year fixed rate, but you would have to be a perfect borrower and willing to pay extra points. Several times since August rates have fallen to new lows. The record rates didn’t last for long but if you missed out, you now have another opportunity. The main cause of this rate rally is investor anticipation of another Federal Reserve Quantitative Easing program before January. However, this rally too might be short lived, as market participants are awaiting the Employment Situation Report due out Friday morning which can be a game changer.
We have only one economic report on tap today that could impact mortgage rates… weekly Jobless Claims. This economic release provides three timely metrics on the health of the labor market:
Here are the results:
Lenders once again have passed along better rate sheets. The par 30 year conventional rate mortgage fell to the 4.00% to 4.25% range for well qualified consumers. Rates below 4% are still available with many lenders, but you would have to be a perfect borrower not subject to any loan level price adjusters (LLPA), have at least 20% equity in your home and willing to pay additional costs. If you are seeking a 15 year term, you should expect par in the 3.50% to 3.75% range with some lenders offering 3.50%.
I definitely favor locking all loans closing within the next 30 days for several reasons. First, today’s rate sheets are the best ever or at least in our generation. You can lock today at rates that have never been available to you. Secondly, we have a three day weekend ahead of us. Lenders tend to be conservative with pricing ahead of a long weekend. So if tomorrow’s NFP data is better than expected we get hit with a double whammy. Worse pricing due to the better data and even worse pricing to hedge for the extended weekend. Finally, the risk/reward makes floating through tomorrow’s report highly risky. If much worse, rates will only slightly improve if any but they have a lot of room to rise… more risk with floating than potential gain.
Many consumers that I speak with are waiting for mortgage rates to bottom to pull the trigger on their refinance. One drawback to that strategy is you don’t know whether rates have bottomed until they have risen… but then it is too late. If you have been waiting to refinance for rates to bottom, we might be there today.
We have only one economic report on tap today that could impact mortgage rates… weekly Jobless Claims. This economic release provides three timely metrics on the health of the labor market:
- Initial Jobless Claims: totals the number of Americans who filed for first time unemployment benefits in the previous week
- Continued Claims: totals the number of Americans who continue to file for benefits due to an inability to find a new job
- Extended and Emergency Benefits: totals the number of Americans who have exhausted their traditional benefits and are now receiving extended and emergency benefits
Here are the results:
- Initial Jobless Claims: -11,000 to 445,000 vs. estimates for a print of 455,000. Prior week was revised worse to show 3,000 more claims. This is the fifth consecutive week of declining claims and the lowest reading since July 2010. BETTER THAN EXPECTED.
- Continued Claims: -48,000 to 4.462million vs. estimates for a print of 4.450. WORSE THAN EXPECTED
- Extended and Emergency Benefits: Emergency Benefits +157,735 and Extended Benefits +98,806 to a grand total of 5.14million
Lenders once again have passed along better rate sheets. The par 30 year conventional rate mortgage fell to the 4.00% to 4.25% range for well qualified consumers. Rates below 4% are still available with many lenders, but you would have to be a perfect borrower not subject to any loan level price adjusters (LLPA), have at least 20% equity in your home and willing to pay additional costs. If you are seeking a 15 year term, you should expect par in the 3.50% to 3.75% range with some lenders offering 3.50%.
I definitely favor locking all loans closing within the next 30 days for several reasons. First, today’s rate sheets are the best ever or at least in our generation. You can lock today at rates that have never been available to you. Secondly, we have a three day weekend ahead of us. Lenders tend to be conservative with pricing ahead of a long weekend. So if tomorrow’s NFP data is better than expected we get hit with a double whammy. Worse pricing due to the better data and even worse pricing to hedge for the extended weekend. Finally, the risk/reward makes floating through tomorrow’s report highly risky. If much worse, rates will only slightly improve if any but they have a lot of room to rise… more risk with floating than potential gain.
Many consumers that I speak with are waiting for mortgage rates to bottom to pull the trigger on their refinance. One drawback to that strategy is you don’t know whether rates have bottomed until they have risen… but then it is too late. If you have been waiting to refinance for rates to bottom, we might be there today.
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