The biggest concern about mortgage rates is that they can go up without notice, leaving sellers wishing that they woulda, coulda, shoulda sold when they had the chance. From MND:
Mortgage rates soared to their highest levels in months today after Minutes from the Fed’s most recent policy meeting showed the board to be more divided concerning the continuation of its most recent round of quantitative easing, dubbed QE4. It’s not that markets think that The Fed’s purchases of MBS (the “mortgage backed securities” that most directly influence mortgage rates) or Treasuries will be stopping any time soon, but however long a particular market participant thought that QE would continue, that time frame was either shortened or called into question after today’s data.
That led to major selling pressure in bond markets, including MBS. It’s as if MBS got a call from their rich uncle saying “hey there sport… Um, yeah…. about those checks I’ve been sending you… you know, the ones you count on to subsidize your fast-paced lifestyle? Yeah… just a heads up that I’m not super sure that I’ll be able to send those for the whole year… just wanted to let you know because I know you were kinda maybe planning on that being an ‘all-year’ sorta thing. Well, it’s been a good talk! Gotta go!”
30yr Fixed Best-Execution–after having been firmly planted at 3.375%–has risen to 3.5% at several lenders, however, lower rates are still available. They’re just going to cost a lot more today than they did yesterday.
The show’s not over either! Tomorrow morning brings the all-important Employment Situation Report. This is always the single most important piece of economic data each month. While we’d recently wondered if its traditional impact would be lessened by the focus on the Fiscal Cliff deal reaction, it’s now looking to be just as important as ever considering that employment metrics are a lynchpin for Fed policy changes (and markets clearly showed us today how very interested they are in Fed policy changes).
After feeling like we just dodged a Fiscal Cliff bullet yesterday, today’s losses come a serious blindside to anyone who’d floated a rate with more optimism. If tomorrow’s jobs data is much stronger than expected, the pain will only continue.
Buyers aren’t going to freak out over 1/8%, but they might pause to see what happens next. Mortgage rates are like the price of gasoline though – they are known for going up faster than they come down.
If interest rates go much above 4% in the near term I could see the recovery slowing down. If we go above 5% then it could stall completely.
Expect rates to increase now that politicians no longer need your vote.
I don’t forsee more than a point. Just like Thaylor I believe anything over 5% will stall home sales completely.
From MND:
As trading got underway Friday for MBS, prices opened up at levels not seen since before the QE3 announcement in mid September. That resulted in mortgage rates at the highest levels since before that announcement.
In terms of a best-case scenario 30yr Fixed, Conventional loan, we’re looking at a shift from 3.25% during the best days of December to 3.5% today.
Lenders vary in pricing and in the cost of “buy-downs” to move between the normal .125% increments in rates. That means that 3.25% is still available, but it would be significantly more expensive than it was on Wednesday–in some cases, as much as 1% of the loan balance in fees (or deduction from rebate). That means that the most efficient combination of rate and fee (or rebate), or Best-Execution, is 3.5%