While the news is just starting to trickle in, over the next week or so you’ll be hearing a lot about how mortgage rates surged higher, and that the days of low rates are behind us.
The mortgage rate surveys will always be a bit delayed, seeing that they always rely on old data. For example, Freddie Mac collects rate quotes from banks and lenders on Monday to Wednesday, and then announces their findings on Thursday.
Unfortunately, a lot can happen in a few short days, or even a few short hours.
It’s kind of like a stock, which can swing up or down throughout the week based on company news and certain economic reports.
It would be somewhat frightening to receive any news that could push your stock higher or lower a day or two after the fact.
This is why you need to be in constant touch with your broker or loan officer, not reading survey days after rates changed.
Why Rates Have Surged
Ever since the positive jobs report was released about a month ago, mortgage rates were dialed on an upward trajectory.
Adding to that unwanted boost was the release of the Fed minutes last week, which revealed that an end could be near for the massive mortgage-backed securities (MBS) shopping spree.
In short, if the Fed isn’t buying billions of MBS each month, someone else will need to fill in for that lack of demand, or prices will need to come down.
Assuming prices of MBS fall, the yield will go up, and so too will mortgage rates. That’s pretty much what we’ve been seeing all week.
In fact, mortgage rates on the 30-year fixed have risen from around 3.5% to over 4% over the past month, with fear anything in the 3% range may be coming to an end.
Put simply, it’s been an ugly sell-off for mortgage bonds, and there doesn’t seem to be any bad news on the horizon to change that.
By bad news, I mean bad economic news that would normally push investors back into bonds, a move known as a “flight to safety.”
If some spell of bad news surfaces, it should push mortgage rates back below the 4% mark, but even then, it will take a long time to get back to where we were.
Unfortunately, in the world of mortgage rates, it takes a lot longer to drop than it does to rise. In other words, lenders are happy to raise their rates in a hurry, but they need a little more convincing to lower them.
Putting It in Perspective
If you’re currently shopping for a home or looking to refinance, and haven’t yet locked your mortgage rate, you’re probably upset or frustrated.
After all, your 30-year fixed was 3.625% at last quote, and today you’re being told it’s 4.125%. What gives?
Well, as mentioned, things move quickly in the mortgage world, and what’s here today may be gone tomorrow. Heck, what’s here this morning may be gone by early afternoon.
It’s for this reason that borrowers are often urged to lock in their rate as opposed to float, to ensure they don’t get caught in a situation like we’re in now.
Fortunately, a ton of borrowers probably locked their rates before the nasty rise, but even if you didn’t, it’s not that bad.
When it comes down to it, mortgage rates are still cheap, cheap, cheap, and the borrower who takes out a mortgage today will still benefit enormously, even if rates aren’t as low as they were last week or last month.
Yes, we all want the lowest rate possible, and it’s easy to get greedy, but in a few years those who took out mortgages today will be pretty darn happy.
Lastly, if you received a rate quote, but didn’t lock, it’s not a bait and switch if your new quote is significantly higher.
Mortgage rates change daily, and a quote is just a quote, nothing more until it’s actually locked and in writing.
If you are being quoted a much higher rate, you may want to shop around just to be sure everyone is pricing higher.
Read more: Mortgage rates vs. home prices
Ain’t that the truth…had my bank now screwed up royally, I would have locked in a rate in the mid-3s…now I’m stuck with a rate at 4.5%, and there is still no sign of actually funding this loan.