Wednesday, March 22, 2023

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Mortgage rates are very volatile right now. Here’s what to look out for.

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Mortgage rates declined. Then mortgage rates went up. Then mortgage rates dropped again.

What the heck is going on there? The bank works, the bank fails. Will the Fed not raise interest rates again?

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called uncertainty This has led to volatility in everything from stocks to bonds and mortgage interest rates.

So if you’re not sure what’s going on? Join the club, no one knows, which is why you’ll see so much movement in every direction.

and because of this You need to be on top of your game if you are thinking of getting a home loan remotely.

Keep an eye on the stock market and the 10-year bond yield.

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Mortgage rates can be quite complicated. but there is something simple must see to predict their direction.

In general, if the stock market goes down So are the mortgage rates. The two often move in tandem.

This idea is bad news and/or economic uncertainty causes stocks and mortgage rates to plummet.

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Bond prices, on the other hand, soared as investors sought the so-called “safe haven,” reducing the associated returns.

A good bond yield to watch is the 10-year Treasury as it is similar in maturity to the home loan. (pays off in a decade or more)

It is a payment with discount points.

Bad news is good news for mortgage rates.

Mortgage rates tend to grow on bad economic news. So if the stock market goes down or unemployment rises Mortgage rates should theoretically improve.

Basically, keep an eye on important economic news headlines. If many banks fail and/or the stock market crashes Chances are the 30-year constant will be cheaper.

One wrinkle here is that if things get really bad, it could throw the secondary market for mortgages off and put lenders under stress.

So you need the right amount of bad news for banks/lenders to act. while pushing interest rates down

Recent bank failures, along with pandemic fears, have been the bad news lately.

However, banks and lenders do not want to be caught on the wrong side. So I guess they will continue pricing carefully.

They won’t go out of their way to lower rates for fear that things will change quickly. All in all, this is still a very fluid situation.

There are many rate distributions at the moment.

That brings me to another important point. with the market in disarray Mortgage rates therefore see a wider range.

in other words You might come across rates in the 5s with one bank and 6% at another. Each company may have its own level of comfort and appetite.

This means that you need to shop more now to make sure you find a lender with a lower price than the competition.

When markets are calm, rates tend to show less spread. So it might not matter much.

If you don’t believe Go to a large bank and/or a mortgage lender’s website. Check out their daily mortgage rates.

You may see rates as far apart as 1% depending on the company and product type.

Jumbos appear to be priced much lower than corresponding loans.

Another thing to consider is the jumbo and consistent pricing. at regular intervals Fannie Mae and Freddie Mac compliant loans are often cheaper than larger loans.

But at the moment, jumbo loans are a cheaper option. at a large bank I see a 30 year jumbo at 6% and a 30 year corresponding loan at 5.375%.

That’s a huge difference. Of course, you can’t control the loan amount. But if you’re close to that threshold, jumbo might be a cheaper route.

FYI, the corresponding loan amount in 2023 is $726,200 for a single property. and higher in high-cost areas

in that same line Purchase loans are much lower than refinance loans with many banks.

However, this can vary from company to company. so again Put in that research and shop around.

Your bid may only be good for a few hours.

If you don’t know Mortgage rates change every day, and now these can change even more quickly. Intraday is not an issue.

There is too much uncertainty right now. Although not as volatile as stocks But mortgage rates often change from day to day based on market conditions.

So if you get a quote Ask how long this price can be used. And even then, don’t expect it to work tomorrow or even the next day.

Mortgage rates have moved up throughout the week. It benefits some and hurts others. depending on how/when they lock.

Remember, until your mortgage rate is locked. It’s just a quotation. which may change at any time

It’s like buying stocks. Until you press send and actually buy. Its price can change.

in terms of forecasting If you believe the economy will get worse Mortgage rates may continue to decline.

But if you think the Fed will raise interest rates next week and things will calm down, then mortgage rates may go back up to 7% again.

Either way, the current state of affairs is not for the faint of heart. Although the opportunity is good (Due to fluctuating prices) there will be many.

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