Hope you had a “happy 4th”. Now say hello to the “unhappy 5th”. The Mortgage Backed Securities (MBS) market saw fireworks of a completely different kind. The market went down by an unprecedented 200 basis points – the steepest single day fall in modern MBS history.
In simple terms – we saw the biggest single day increase in mortgage rates. Within two weeks, we have now witnessed biggest weekly increase and biggest single day increase in mortgage rates….ever!!
Mortgage rates move in the opposite direction to MBS. When MBS go down in price, mortgage rates increase. Even though it was a short week, the MBS went down by a whopping 255 basis points. Better than 314 bps that we saw two weeks back. But combined together, that increases the rate by another 0.5% on most loan products. And thats just in 2 weeks. This would be the 9th week in a row that the rates have gone up.
The big event this week was Friday’s Employment report. The labor market data came in stronger than expected, which was great news for the economy, but it caused mortgage rates to end the week substantially higher. Against a consensus forecast of 160K, the economy added 195K jobs in June, and upward revisions to the figures from prior months added another 70K. The Unemployment Rate remained at 7.6%.
A quick look at top banks rate sheet shows most of them are quoting annual percentage rate (APR) of over 5% on conforming high balance loans (loan amounts between $417,001-$625,500). Even conforming loan (loan amount <$417,000) rate is close to or higher than 5%. Compare conforming rates here and see how Arcus Lending stacks up. We consistently price better than big banks, especially for fixed rate loans. See Wells Fargo’s today’s published rates.
Outlook for Mortgage Rates - If you have been following my blog, I have written 5 posts on mortgage rates in last 45 days. In every single post I predicted rates wont go down, if anything they would go up. I have been talking exactly the same thing on my radio shows. I still maintain the same outlook. I dont see rates going down. They are at a point of no return.
How does that impact you, if you are thinking of buying - If you are currently pre-approved, you should go back to your loan officer and get the numbers done again. Chances are you wont qualify for the same amount anymore. If you would like to get pre-approved with us, get started here.
Lets take an example – If you were pre-approved in early May for a $500,000 loan; you would qualify for only $430,000 right now. This assumes everything else remains the same other than mortgage rates. So, dont keep looking for homes with your old pre-approval. They are not even worth the paper it was written on.
If you would like to discuss how this sudden increase in rates impact you – please email me at email@example.com for a complimentary consultation.