Are you thinking about refinancing? Wondering if rates will rise or fall in the next few days?
Conforming Mortgage Rate Predictions Only
First, the fine print. These mortgage rate predictions are for conforming mortgages in Cincinnati, Ohio; Loudoun County, Virginia; and everywhere else that conforming mortgages are available.
Jumbo mortgages are not part of this survey because jumbos don't price like conforming loans. The same goes for FHA streamlines. Furthermore, unique property types including non-warrantable condos in Chicago, condotels in Florida, and loans for investors with more than 4 properties financed are excluded.
Breaking Down The Predictions
Here's the mortgage rate outlook for the upcoming week:
- 50% think mortgage rates will increase
- 29% think mortgage rates will decrease
- 21% think mortgage rates will won't change
I expect mortgage rates to increase.
My advice not be appropriate for your individual situation and I'm not always right. Ultimately, you may find your time better spent listening to The Grapefruits of Wrath.
"Here come the inflation hawks. Mortgage rates rise."
This all has an unfortunate, familiar feel to it.
The 600 Billion Dollar Bond Backlash Begins
Two weeks ago, the Federal Reserve made a new, $600 billion commitment to the bond markets. The plan is commonly called QE2, or Quantitative Easing: Part II.
Upon the QE2 announcement, mortgage markets immediately improved, and for good reason. A bonus $600 billion in demand is enough to unhinge the Supply and Demand curve and that's exactly what happened. Bond prices rose and bond yields fell. Mortgage rates made new all-time lows. But only for a minute.
Just 40 hours after the Fed's plans for were made public, the Bureau of Labor Statistics released the October jobs report and it showed
151,000 new jobs created. Economists had been expecting about one-third of that. Mortgage rates rose on the notion that the economy isn't as weak as had been purported.
And then, a small firestorm erupted around QE2.
Some observers made the obvious point that the Fed is buying $600 billion in U.S. bonds and, to fund the project, the group is -- quite literally -- printing its own cash. This is inflationary because "printing money" creates new supply that devalues every other dollar in circulation.
The concern
spread overseas as nations including China, Germany and Japan joined the chorus of critics.
Inflation is low today, it's argued, but the Fed is setting the stage for high inflation tomorrow, and inflation is awful for mortgage rates.
Inflation Concerns Mount; Mortgage Rates Are Rising
The specter of inflation is always present in bond traders' minds, but it has a nasty way of going viral. What begins as a few legitimate economic concerns, when given the right petri dish, can spread into a full-fledged panic in days.
The conditions look right for that kind of panic.
The current bond market looks a lot like it did in May of 2009. Inflation fears took rates up 1.125% in 10 days back then.
If you'll remember back to May 2009, the first stimulus package was 3 months old and the Fed had just started another round of bond-buying. After a run of poor economic data, mortgage rates had made all-time lows and a mini Refi Boom had started.
Wall Streeters had piled into mortgage bonds as a safety play -- and then they got spooked. Investors couldn't sell their stuff fast enough. Stock markets rallied and bond markets reeled. Lenders were issuing 4 rate sheets per day just to keep up.
But it wasn't just how fast rates were changing -- it was by how much they changed:
- Tuesday, May 26, 2009: Rates up by 0.250 percent
- Wednesday, May 27, 2009: Rates up by 0.625 percent
- Thursday, May 28, 2009: Rates down by 0.250 percent
- Friday, May 29, 2009: Rates down by 0.375 percent
- Monday, June 1, 2009: Rates up by 0.500 percent
It was absurd, and the market looks poised to do it again. We're a single piece of inflationary data away from seeing the return of 5 percent mortgage rates.
It's Time To Lock Your Mortgage Rate
When mortgage rates move, they move quickly. Especially when markets are wound as tightly as they are right now.
My advice: There's no penalty for refinancing twice (or thrice!) so take the bird-in-hand. Refinance now. Then, if the market goes lower in 2011, refinance again later. Just make sure you're asking your loan officer about "zero cost loans". It would be silly to pay closing costs twice.
If you're shopping for a loan, those that have their files prepared and ready to submit to underwriting when the rates have the right pricing will get the right pricing. Those that wait to start to put the loan process when rates are there will miss the boat. Why? When a file is submitted, to ensure the best chance of meeting deadlines, you must have a complete file from start rather than waiting until the moment is right to start it. By then it's usually too late to get the rate that the consumer would like to get.
I've seen this over 20 times in the past 30 days alone with families that think the rate that we quote one day will still be there in 5 days or 3 weeks later by waiting until they think or hear interest rates are where they need to be to move forward. In the past 3 business days, since Tuesday November 9th, 2010, rates have deteriorated by .5% in rate.
As mentioned above, the bond markets this past few weeks and over the next few weeks are very volatile. They are constantly changing, not just daily, but sometimes 3 to 4 times a day in rates going up or down enough to make it so the pricing great enough to have us help the consumer in paying closing costs or the opposite in the borrower having to pay more in closing costs if you want a rate when the pricing has deteriorated.
To ensure the lowest rate possible, you don't wait until rates are back to the desired rate or where they've been to start the loan application and/or , having your conditions and checklist of items sent in is critical and important to verify your income documentation and
submit file ask me what I can do for you.
- Send me an email or call me with the basics of what you're trying to do. We will discuss your scenario.
- I'll have some follow-up questions for you.
- Next, I'll get you pricing and tell you what can be done and what is realistic or not realistic.
If you like the rate, I'll lock it for you and we'll start working toward closing. That's it!
Expect me to reply to your phone call or email within about an hour, during business hours.
for a real-time rate quote.