My Mortgage Online

After hitting 2011 lows on a steady “flight to safety”, home loan
borrowing costs have drifted incrementally higher in six of the last six
trading sessions.

The week ahead carries the potential for the broader bond market to confirm a potentially fence-sitter unfriendly technical shift
from bullish to bearish. It hasn’t been noticeable on the surface
because borrowing costs have been inching higher over the past few days,
but thin margins are starting to add up and it’s making us more nervous
about a jump in “Best Execution” mortgage
rates. This move has yet to be confirmed but we’re definitely teetering
on a shift…

CURRENT MARKET: The “Best Execution” conventional 30-year
fixed mortgage rate is 4.875%.  For those looking to permanently
buy down their rate to 4.75%, this quote carries higher closing costs. The
upfront fee to permanently buy down your rate  to 4.75% is not worth it to
every applicant, we would generally only advise the permanent floatdown if you
plan to keep your new mortgage outstanding for longer than the next 10
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 4.75%. 15 year fixed
conventional loans are best priced at 4.125%. Five year ARMS are best priced at
3.50%.

PREVIOUS GUIDANCE: No change to our recent stance
that favors
locking for short term/sensitive outlooks and allows for longer
term/less
urgent outlooks to wait for an additional recovery in mortgage rates.
The bond market that indirectly affects mortgage rates moved to the edge
of its
recent range. If you are being quoted a below
“CURRENT MARKET” mortgage rate…you are in danger of losing that
quote if this “directional drift” heads much further in the wrong
direction. There are events that can reverse this alarming trend, but if
that doesn’t happen, the penalty for waiting too long to lock may be a
lot less tolerable next week.

CURRENT GUIDANCE: Bond investors largely ignored economic data
and breaking news headlines last week. Instead investment decisions
were based on trading technicals… which are not looking mortgage rate
friendly at the moment.  But investor participation was light and
trading volume has been below average which indicates the move higher in
rates was met with little resistance and is therefore vulnerable to a
fence-sitter friendly reversal. With respect to Friday’s guidance which
warned of a bigger move in the wrong direction, we’re very much still in
the same position. Reason being: not much happened today to suggest
where things may go from here.  In the week ahead we are looking for the
market to paint a clearer
picture of its directional bias.   Locking is advised for those working
on a short-term time frame. For long-termers,  if you need to lock a
loan in the next month, it’s time to shift your bias from
aggressive/neutral to defensive/neutral. 

CHART: CONSUMER BORROWING COSTS

ECONOMIC CALENDAR: THE WEEK AHEAD

…(read more)