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For the last three months, the 30 year fixed rate has been consistently below 5%. This drop in rates has provided many of us a once in a lifetime opportunity to refinance our mortgages to rates we have never seen before. As a result, those who have taken advantage of this drop in rates are saving thousands of dollars in mortgage interest expense. Regretfully, those days may now be behind us.
Yesterday there was a massive sell of mortgage-backed securities. This is important because daily mortgage rates are determined by the value of these securities. When the value of these securities is up, mortgage rates come down. Inversely, when securities values decline in price, mortgage rates go up. As a result of this massive sell-off, we saw rates increase almost a full percentage point. Some media outlets have even termed yesterday's market movement as Black Wednesday. Obviously, that is HUGE.
For those who have not yet refinanced their mortgage, this doesn’t mean the opportunity has gone away completely. The Federal Reserve has a program in place to purchase mortgage backed securities in an effort to push rates down. The Fed is scheduled to buy more securities in early June, so it is possible that we may see rates come back down. However, rather than seeing rates consistently as low as they have been, I think we will now see brief windows of opportunity. For those of you who have rates at or above 5.75%, the best strategy going forward is going to have your mortgage application in, your appraisal completed and everything ready to go so that if and when rates dip - you are in position to lock and close quickly. Essentially, you’re going to need to be a bit more strategic about the process. As most of you know, I monitor the bond market all day and I will be able to alert you of these dips in rates.
I highly suggest that you give us a call so we can discuss your situation and develop a plan to ensure you don’t miss out on these low rates. Also, if you have family, friends or co-workers who haven’t yet refinanced their mortgages, urge them take action now. We would be honored to assist anyone that you would refer to us.
Thank you for taking a few minutes to read this. We felt that it was important to alert everyone of this dramatic shift in the market that took place yesterday.
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