What Happened to Those Low Mortgage Rates?
Are you wondering how can the Federal Reserve lower their Overnight Rate by 0.75 and then 0.5 within only a few weeks and mortgage rates dipped for one morning and then moved higher?
From a casual glance, does that make sense?
The typical gloss-over from the general news media makes the connection between the Fed's actions and mortgage rates seem like simple math. It so is not! Our financial markets are much more complex than that.
Avid readers of the Mortgage Manifesto know the truth behind the economics of mortgage rates. What we've seen so far the past few weeks is a good lesson in how mortgage rates move.
Another point on my mind is the timing of rate locks. Mortgage rates are always moving in a range. Your goal, if you are seeking new financing, is obviously to lock while they are in the low part of the range and save money. Now, how do you do that?
Mortgage rates move from pressures on the general bond markets but then we have to keep in mind that a specific lender is the one offering the rate. Take this for example, one of our primary investors offered aggressive pricing on the Wednesday dip three weeks back. When they did that they took in 1,200 new loan applications across the country. 1,200. This surge of volume has now hit a completly understaffed undewriting department and the turnaround time for new files hitting underwriting is running about 10 days.
I advised my clients that acted on that dip in rates to get information to me ASAP so we could get to the front of that line. I'm happy to report that those clients are hitting their closings now.
If you've been reading along the past few weeks you know I foresee another similar dip somewhere in the next 2-3 weeks. Many of you have supplied me with the information I need to lock you in should this dip occur. There are many more people waiting in the wings for this dip than there were for the unexpected move a few weeks ago. That means we can anticipate another big surge. You know the drill, those that prepare ahead get through the crowd the best.
Oh, that lender I mentioned, they've now backed off their rates higher than the market. Why? They need to handle the business they already took in before they can add more to overworked staff and systems.
So, even though the market might improve, if the lender's systems are already taxed don't expect them to offer super aggressive rates when they don't need to.
The advice going forward is get an application prepared and have your documentation handy so you can pounce on the next opportunity.
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