January 19, 2017
While we don’t report on mortgage rate trends on a daily basis, we do give more time to that coverage when circumstances warrant, and this week definitely rates a closer look at the trends. Since our last report, mortgage rates moved decisively higher, pushing back in the direction of the mid-four percent zone (but not there yet).
Some market watchers blame (at least in part) bond market performance for the most recent upward spike that pushed 30-year fixed rate conventional mortgages into a range between a best execution 4.125% and a best execution 4.25%. Prior to that, coming out of the weekend we saw more lenders at the lower end of that range.
Could some borrowers see them most recent changes reflected in closing costs rather than actual mortgage rate changes? It’s entirely possible but that will change if the upward movement gains momentum.
FHA mortgage rates are still holding in a best execution comfort zone of 3.75% but if upward pressure continues to affect mortgage rate trends, we could see that number at the bottom end of a new range for FHA mortgage rates.
(The rates cited here are best execution rates which assume ideal conditions; these rates are not available to all borrowers or from all lenders. Your experience may vary based on your FICO scores, loan repayment history, etc.)
So from our last report where we noted some industry pros were saying “lock within 15 days, and carefully weigh your floating options otherwise” we are now seeing advice that modifies this to remind borrowers that “risk tolerance” is the phrase of the day. If you cannot or do not want to take a financial risk of having to commit to a mortgage rate higher than the ones seen today (best execution), floating might not be the right option for you.
Setting a limit to how high rates might go before you ultimately make the commitment with your lender is the first and most important thing to do before choosing to “float” in hopes of getting a lower rate. It’s true that as our sources and other industry professionals are pointing out right now that we are within a specific range of rate behavior in the short term.
The most recent move higher is still within that range according to our sources and some feel it could be a matter of time in the short term before we see rates fall down into the lower part of the range.
But if that doesn’t mean much to you and you simply want to eliminate the uncertainty, discuss this situation with a loan officer and get some advice on how to proceed. Floating is never risk-free, and there are plenty who would rather avoid the risks altogether.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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