As a mortgage banker I have the distinct privilege of being simultaneously a genius and an idiot. The viewpoint is reached as a matter of perspective and today I get to be an idiot because I have to, once again, undo what the news networks have done. This means I am spending extra time (15 minutes or so) with all of my customers and educate them in what most of the media needs an education. You see it's all over the news today that rates are headed to the fours. Orly?
First let me say I agree that rates are down and may stay down for a week or more. The danger of reporters (here I go again) putting forth information that "rates are headed down into the fours" is that they have no idea what would cause this or even if it is a fact. Having attended a University where many journalism majors have gone on to great things and having known some of them in school I still have to wonder if they are as ditsy today as they were 30 years ago. This is not intended to disrespect all journalists just most of them - BECAUSE they terribly muddy the waters on highly important issues by delivering information they do not understand to the masses who also do not understand.
Next let me add rates are driven by the market - the government does not (yet) mandate rates. Once we become fully socialist then the government can set rates but we are not quite there ... yet. If Mortgage Backed Securities are not producing a profit for investors rates are up - if those same securities are producing a profit for investors rates are down.
Rates are still based on risk. Riskier loans still have higher rates. FHA rates are not the same as straight Fannie rates. Rates in Florida are not the same as rates in Georgia. Rates on a $60,000 loan are not the same as rates on a $180,000 loan. Rates on a loan with 20% down are not the same as rates on a loan with 10% down. Rates with a 680 credit score are not the same as rates with a 755 score. Some investors (Fannie, Freddie, Ginnie) offer programs at Fixed 30 terms that others do not offer. It's not as simple as saying, "the mortgage rate today is 5% and tomorrow will be 4%".
The biggest lie the mortgage industry has ever told you is "Today's Fixed 30 Rate Is ..." and the second biggest lie they have ever told you is "No closing costs ..."
One thing you could see happen over the next few weeks to help keep rates down is based on the very basic economic principal of supply and demand. It is possible that so many people will be buying and refinancing over the next few weeks that rates will need to adjust to help keep the supply of money in check with the demand. This is where the rubber really meets the road and we get to see how many deep pocket investors step to the plate. I don't know the answer, CNN doesn't know the answer and the mighty supreme Congress does not know the answer (they don't seem to know the answer to many questions).
Yes, rates are down. Your local mortgage broker (the one within driving distance from your home so you can throttle them when they mislead you) is required by Federal Law to show you ALL of their income. The lender 3 states away is NOT required to show you all of their income. With a local broker from your area you should easily be able to get the best rates and best closing costs and if you can't that's simply because you don't know how to shop for a mortgage and are continually misled by the media.
EDITED: Only five hours after posting this the rates did a U-turn and headed back up. What say ye media geniuses now, eh?
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