Long-term rates, such as 30-year fixed-rate mortgages, pay little attention to short-term rates, responding instead to economic growth and inflation pressures. They more closely follow other long-term rates, such as the yield of the ten-year Treasury Constant Maturity.
Short- and mid-term ARMs, such as the 5/1 ARM, are also affected by trends in short-term interest rates. As a lenders’ cost of obtaining funds to lend changes, some of those reductions or increases are passed to borrowers in the form of lower (or higher) starting rates. The Fed rate directly impacts short-term rates like credit cards. This according to HSM.com.
Days before the Fed lowered rates the mortgage markets saw improvement. This lasted about 6 days. In fact, as soon as the Fed officially cut its interest rate we saw mortgage rates begin their ascent. And then the jobs report hit, and it was a shocker, showing much more job creation than expected, and revising previous reports higher as well. While this is good for the economy, it is also very inflationary and will likely reduce the speed and quantity of future fed rate cuts. Interest rates moved higher in response to this new data.
In my opinion, there are very few reasons not to lock the loan once under loanDepot allows a true rate renegotiation on most of our loan options, if the market rate significantly improves then we can offer that benefit to our buyers. Many other lenders cannot do this and may encourage buyers to gamble on the rate movement. (Just ask anyone who could have locked at 6% but is now at 6.5% how much difference a week can make!). And when borrowers return to refinance we waive lender fees – that’s a huge savings.
It’s not all higher-rate news though. First-time homebuyers and veterans using Oregon’s Rate Advantage loan program received a rate CUT and currently have access to funds in the mid-5% range. The state may increase that interest rate to match the market interest rate more closely, but for now it is a HUGE advantage for my clients!
DAVE PORTER has been in lending for over four decades. He is a loan consultant for loanDepot in Southern Oregon. He can be reached at 541-708-4020 or at dporter@loanDepot.com. He is licensed to originate home loans in OR, CA and WA.
This information is not intended to be an indication of loan qualification, loan approval or commitment to lend. Loans are subject to credit and property approval. Other limitations apply. Rates, terms and availability of programs are subject to change without notice. State disclaimer: loanDepot.com, LLC, NMLS ID 174457. www.nmlsconsumeraccess.org Licensed by the OR Division of Finance and Corporate Securities, Mortgage Lending ML-4972. | WA: Licensed by the WA State Department of Financial Institutions, Consumer Loan Company CL-174457. | ID | CA: Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act CRMLA 4131040.
