Arizona Mortgage Rates Shift

Arizona Mortgage Rate Shift

Last week kept the lid on our shifting Arizona mortgage rates.  Thankfully, we received a nice breather from the week that increased rates for mortgage lender’s nationwide.  Why the extra stress from 2 weeks ago?  2 weeks ago marked the fastest/largest rate increase in mortgage rates in one week ever (and they have been keeping mortgage rates stats since 1971).   However, let’s keep this recent rate shift in perspective.

Recap of record rate week (week ending 5/21)

May 22nd Bernanke comments (Fed may consider tapering*)   +   June 19th Bernanke comments (repeat – Fed may consider tapering*)   =   Largest 1 week increase in mortgages rates in the history of tracking mortgage rates (per Freddie Mac data)

However, if we we already had historically low Arizona mortgage rates than the “largest one week rate hike in history” combined with the “lowest mortgage rates in history” means that Phoenix area home loan rates are still not that high.   In fact, if a client locked in a rate on a 30 year fixed as of 05/25/2013 their mortgage rate would still be .77% lower than 477 out of the past 509 months average 30 year fixed rate (assuming 740 score, 20% down, conventional, primary residence purchase).   The number stops at 509 because that’s as far back as Freddie Mac 30 year fixed rate data goes.  In year 1 of keeping track rates were 7.44% so really the stats point to today’s mortgage rates being even better than the 477/509 ratio historically speaking.

Fed Talk: Big Ben and Friends Moving the Market

The Fed is now trying to “talk” back some of the rate increases sparked by Ben Bernanke’s comments about winding down the programs that have pushed Arizona mortgages rates down and held them there like a beach ball being pushed under water (these programs started in 11/2008 with QE 1 being the 1st of 5 similar programs).  While this past Monday (05/24/2013) started out as bad as last week (rates were up another .25% by 8 am AZ time due to fears that China would not  be a viable mortgage bond buyer AND the Fed was backing out) the market recouped its losses yesterday and remained relatively flat today.  By the end of the week 30 year fixed mortgage rates recouped a little more of what they lost the week before.  I loved a good roller coaster ride when I was a kid too ;).

The Fed knows that a jump from the 3’s to the 5’s in rates is NOT good for our Arizona (and the national) housing market and therefore our overall economy however they are past the notion that rates need to be “super” low (aka – in the 3% range) and I agree.  What they would like is if they/the Fed could have it their way is a steady adjustment from Fed supported mortgage rates back to a natural rate market (which many feel will mean mortgage rates in the 5% to 6% range over the next 2 years).   Then, the market would be without Fed training wheels and back to “normal” meaning no outside influence other than natural market forces (bond buyers and bond sellers) dictating mortgage rate levels.

When do you Lock in Your Mortgage Rate?

This question is very popular right now.  When working with my team the answer is easy.  For the most part the answer is “lock today.”  We offer a float down that allows us to lock now to avoid when Arizona mortgage rates increase and then lower a client’s rate if/when the market improves/rates drop.  If you are working with a lender that does not have a float down you MUST devise a communication plan with your loan officer to make sure they are told when mortgage rates are moving and what that rate movement would do to their approval.

Just last week, I received 3 panic-stricken new client phone calls that were working with a different Arizona lender that went something like “my lender did not lock me and now I am not approved – help!!”   The difference between 3.25% and 4.75% can throw a borrower that was near their maximum debt to income limit out of whack in a heartbeat!   Also, set up a sort of stop-loss in case the loan officer and/or client cannot be reached on the phone and a decision needs to be made to lock – ex:  if rates go to x% than lock it in.   Take the stress out and lock on our float down lock!

By Jeremy House

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