Stock Sell off Leads to Lower Mortgage Rates, Locking
Posted 01-22-2010 at 08:28 AM by VictorBurek
Mortgage backed securities closed at a new 2010 high yesterday as a stock sell off lead to a flight to safety rally. The move higher in the fixed income market and the move lower in stocks was prompted by an announcement from President Obama that he is planning on getting more involved in the financial markets. He proposed limiting the size of banks and their risk taking/profit making strategies. Market participants were rattled by this announcement resulting in a need to re-allocate their funds to the safety of U.S. treasuries and MBS. As the price gains with MBS held through close, most lenders did reissue rate sheets lowering consumer borrowing costs.
There is no economic data hitting the news wires this morning.
Reports from fellow mortgage professionals indicate lender rate sheets are slightly worse than the last rate sheets of yesterday. The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking to access home equity, you should expect an interest rate .125% to .375% higher or additional closing costs.
I am shifting my lock advice from you should consider to you should strongly consider locking. Yesterday’s rally in the fixed income market was very reactionary due to the lack of details from the Obama administration’s proposed financial reforms. It is very possible we get a correction today. The recent price gains and improvement with mortgage rates warrant locking. Lacking a significant shift with investor sentiment, it is going to be very difficult for mortgage rates to continue to improve.
If you decide to risk it and float, keep an eye on the stock market today. If stocks rebound, money will flow out of the fixed income market resulting in higher consumer borrowing costs. If stocks trade in the red or sell off, we could possibly see mortgage rates move lower; however, the safe call is to lock and take advantage of the price gains we have enjoyed this week. As I have said in the past, it is better to lock when you should have floated than it is to float when you should have locked.
I would like to hear from fellow mortgage professionals. What is your opinion of lock or float?
I hope everyone has a great weekend.
There is no economic data hitting the news wires this morning.
Reports from fellow mortgage professionals indicate lender rate sheets are slightly worse than the last rate sheets of yesterday. The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking to access home equity, you should expect an interest rate .125% to .375% higher or additional closing costs.
I am shifting my lock advice from you should consider to you should strongly consider locking. Yesterday’s rally in the fixed income market was very reactionary due to the lack of details from the Obama administration’s proposed financial reforms. It is very possible we get a correction today. The recent price gains and improvement with mortgage rates warrant locking. Lacking a significant shift with investor sentiment, it is going to be very difficult for mortgage rates to continue to improve.
If you decide to risk it and float, keep an eye on the stock market today. If stocks rebound, money will flow out of the fixed income market resulting in higher consumer borrowing costs. If stocks trade in the red or sell off, we could possibly see mortgage rates move lower; however, the safe call is to lock and take advantage of the price gains we have enjoyed this week. As I have said in the past, it is better to lock when you should have floated than it is to float when you should have locked.
I would like to hear from fellow mortgage professionals. What is your opinion of lock or float?
I hope everyone has a great weekend.
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