Any Rate Relief Will Be Temporary
A: Well, 2 days ago I told you to expect some relief in the mortgage markets, "...as long as there is no reversal to the downward trend..."! Of course, I picked the exact bottom to the 10YR's volatile trading of late as yields since jumped back up 14 basis points in 2 days time (0.14%) to near 5.21%. However, the lag did provide some relief to the mortgage markets as of yesterday and today, although not as much as I was hoping for. With 10YR yields popping back up again, expect any relief in mortgage rates to be temporary!
Here is the move in yields since I wrote the post "So Rates Rose & You Didn't Lock In?", 2 days ago.
According to CNN Money article yesterday titled, "Mortgage Rates Back Off":
Mortgage rates eased slightly after taking their biggest jump in four years a week ago, Freddie Mac said Thursday. Last year at this time, 30-year mortgage rates averaged 6.71 percent.So you did get a bit of relief, although it was very minor since the drop in yields didn't last very long. If 10YR yields hovered under 5.1% for the week, you would have seen some more relief in the mortgage markets heading into next week. But that didn't happen. Instead, rates popped again and the 10YR yield is closer to 5.21% right now.The rate on a 15-year loan averaged 6.37 percent, down from 6.43 percent a week ago. Five-year Treasury-indexed adjustable-rate mortgages (ARMs) averaged 6.31 percent this week, down from 6.37 percent last week.
Again, with rates already making their big move higher it is up to the buyer to keep tabs on the 10YR yield for clues as to whether they should LOCK IN now or wait a bit. It all depends on your unique situation and when you expect to close or refinance. If 10YR yields push back to 5.3%, LOCK IN NOW! If they drop back down to 5.1% or under, WAIT for the lag to provide relief to lending rates; a few days or so.
Post a comment if you have a specific situation you want my opinion on as far as when to lock in!
Comments (3)
I am not sure trying to time this is a good idea. Rates are going higher in the near to medium term. If you're in danger of not being able to make the rate adjusted payments, you need to re-fi now, not later. If rates by some miracle do come down, you can then make the decision to refi again at a later date.
Unless you're super rich, housing is a leveraged asset- you never want to be on the wrong side of a leveraged position. Ask Bear Stearns and Aramanth.
Posted by drtomaso | June 22, 2007 2:39 PM
Agreed...very hard to time your lock in especially AFTER such a big runup. rates are trending higher and even 5.15% is low historically! Lots of upside potential.
But so many variables are in play here anything can hapen. With commodity prices so high and fed on hold, I wouldnt be surprised if 10 yr trended higher than overnight rate of 5.25 and stayed above that level.
Posted by Noah | June 22, 2007 9:45 PM
We just locked in our rates for 90 days (new condo development - expect closing delays). Even our mortgage broker, who's very experienced with rate volatility, was unable to advise whether rates will come down in the short term. I think it depends on your appetite for risk - if you don't lock in, you're probably risking up to 0.5% upside or downside over the next 60 days. This may not be material if you take out a small loan and expect to repay it quickly. It would be material if you're highly leveraged, however.
Posted by Sydney | June 23, 2007 12:55 PM