February 28, 2020
With mortgage loan interest rates at eight-year lows, coronavirus fears, and a lot of market watching in the second month of 2020, it seemed like a good idea to resume a feature we had posted here for a good long while; a regular look at mortgage loan interest rate trends.
And those trends are well worth watching at the moment; FHA and VA mortgage loan rates are advertised (at the time of this writing) at a best-execution 3.0%.
You read that correctly, some FHA lenders are reporting mortgage loan rates at a flat three percent.
That requires some caveats; not all lenders offer that rate, not all borrowers qualify for that rate, and not all lenders adjust their mortgage loan interest rates in the same way, the same amount, or for the same duration.
But what should we take away from the interest rate situation as it pertains to the final week in February 2020?
Mortgage rates are being pushed lower due to investor reaction to fears of a worldwide coronavirus problem.
The downward pressure placed on rates is not expected to last indefinitely but for now, many experts are talking about a situation where rates do not rise as quickly as they have fallen, but there is also talk of a market correction where rates could sharply move higher when the downward pressure comes off.
Does that sound a bit like a plumber’s problem? It’s not exactly the same, but the results are–a correction to a problem that brings a certain amount of “backsplash”, so to speak (staying true to our plumbing metaphor).
Here’s the question some savvy borrowers are asking right now; is it better to commit to a mortgage loan interest rate or wait and hope the rates go even lower?
Locking And Floating
There is, admittedly, some potential for rates to move lower. But that potential does not translate into a good risk. Borrowers rarely have a chance to compete for rates at the lows they are now. If you “lock” and make a commitment with your lender to fix an interest rate until closing time, you are protected from further rate changes, upward OR downward.
Those who see rates moving lower who have already negotiated an interest rate lock? Try calling your lender to ask what would be required (if possible) to renegotiate the lock.
But you may not be able to simply make a new agreement just because you want it–certain conditions may be required in order to justify the change. Ask your loan officer to be sure.
The other option is to “float”, which is when a borrower who has been approved for the mortgage and is ready to make a mortgage loan rate lock commitment with the lender, but holds off on doing so in case rates move lower.
Some get a benefit from floating. Others get burned. It all depends on which way the rates go in the meantime. And the general advice from some market watchers? Floating right now carries a bigger risk, and perhaps not such a great reward depending on how much farther rates do or don’t fall.
If you get a rate you like at present, and you are happy with it, it may be best to take the deal and not to worry about whether rates might fall into the high two percent range. If they do not, you’ll be glad you pulled the trigger and didn’t look back. And even if they do move lower, you protect yourself against the possibility of higher rates.
Mortgage Rate Trends
Mortgage rates at the time of this writing include 30-year fixed rate conventional mortgages in a range between 3.25-3.375%. FHA and VA fixed-rate mortgages are 3.00%.
The numbers reported here assume ideal conditions and well-qualified borrowers. Your results may vary depending on FICO scores and other financial qualifications.
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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