I will do my best to keep you aware of what is going on in the mortgage market as we fight through all this uncertainty in the markets caused mostly by the coronavirus scare. Below is a good summary of what we experienced this past week. A week ago, we were looking at the best rates we had ever seen in 6 decades+. Early on this weeks, the market got unhinged and mortgage rates went nowhere but up. While we believe rates should be much lower and will return to or near those lows we reached just a week ago, it is very hard to say when things will settle down. Did you ever expect the shelves in supermarkets to look like they do now? Same with us and the mortgage market. We have never seen reactions like we are seeing now and we are in uncharted territory ourselves. Bottom line, if you got locked in before this week, you are looking great and your locked rate is way below market. If you didn’t get locked in, we recommend you put yourself in a position to lock in when things settle back down as the opportunity should come back to lock in some historically low rates moving forward. For now, read this past weeks update below:
Mortgage rates rise sharply from last week’s record low
Rates jump as much as 1 percentage point as lenders are overwhelmed by mortgage applications.
The lowest 30-year fixed mortgage rates in modern U.S. history imploded midday Monday, moving sharply higher. Many mortgage lenders raised their rates several times on Monday, Tuesday and Wednesday.
A well-qualified borrower could get a 3% rate on a 30-year fixed rate without any closing costs on Monday morning. Absolutely astounding! By Wednesday afternoon many lenders were offering that same no-cost loan at 4% or even higher.
The 10-year Treasury bond yield (which 30-year mortgage rates tend to follow) briefly hit a record low rate of .318% early on Monday, then making a dramatic U-turn, ended the day more than 22 basis points higher at .54%. By Wednesday, the 10-year was up another 28 basis points, ending the day at .82%.
Man alive! How can this be happening when it seems like the whole world is running away from the stock market and hunkering down in a flight, no, a stampede to pouring their money into the quality and safety of U.S. Treasurys?
The answer: There is an oversupply of borrowers wanting mortgages and the mortgage industry does not have the labor force in place to handle this refinance loan application surge.
Dave Stevens, retired president and CEO of the Mortgage Bankers Association, points to waning investor demand and mortgage lender capacity challenges.
“Investors are lowering bids. (Loan) servicing bids are getting cheaper,” said Stevens. “And staff is overwhelmed.”
If you got your loan locked and you are on your way to funding, congratulations!
If you missed the window, well, now what?
Consider your current mortgage against today’s market rates. Rates are still darn cheap. If you can get a no-cost loan at a lower rate than what you have now, just do it!
You also should consider shortening your loan term or pulling cash out.
Chances are great that the coronavirus will have long-term repercussions on the global economy. It’s an easy bet to see a big, bad recession coming as a result of this pandemic. Once these mortgage application lines clear out, rates will likely drift down again, and perhaps down even further. Yes, you will get another bite at the apple.
- Ken Thayer, President of RFC