Predicting February’s Mortgage Rate Behavior Using January’s Market Data

• Tweet

Mortgage rates regained a sense of calm last month as markets recovered from a tumultuous December.  After shedding 300 basis points to close out 2009 -- that's 3 discount points per loan, by the way -- January's pricing recovered by nearly two-thirds.

Rates eased lower day by day in the first month of 2010 and, more importantly to rate shoppers, rates were mostly steady.

On average, mortgage lenders issued just 1.4 rate sheets per day in January, or 7 per week. Mortgage rates haven't been that stable on day-to-day basis in 10 months.

But first, a definition: What is a rate sheet? A rate sheet is a mortgage lender's pricing menu.  Rate sheets lists the rate-and-fee combinations for every mortgage products under the sun, including:

• 30-year, 20-year and 15-year fixed rate mortgages
• 5-year, 7-year and 10-year adjustable rate mortgages
• All variations of jumbo and super jumbo mortgages
• The complete line of FHA and VA mortgages
• Loans for condotels and non-warrantable condos

If a lender offers it, it's on a rate sheet.

The very nature of mortgage markets means that rate sheets are in constant flux.  It's why a mortgage rate is rarely good for more than a few hours.  Similar to beef or lobster, "market price" changes all the time. You can't rely on last night's menu.

New day, new costs and if your current Good Faith Estimate and/or rate quote is older than 5-and-a-half hours, it's officially outdated. Lenders won't honor it.  It's time to start again.

Now, the good news is that rates are relatively tame.  Getting 5 hours-plus to lock a rate is a gift from the Mortgage Gods.  Unfortunately, though,the last time rates settled in like this, it was just a brief calm in a turbulent time.  Sort of like the eye of a hurricane.

From last March, you can see the "V" shape in the chart above. I suspect we're in a similar situation now.

The economy is recovering quickly, corporate earnings are booming, and the Fed is withdrawing its support for the mortgage market. Sooner or later, mortgage markets are going to sell off.  It hasn't happened yet because demand for U.S debt has been high.

But, as the global economy emerges from this generation's worst recession, investment dollars will even out between the U.S. and elsewhere and, when that does happens, it's yet one more reason for rates to jump.

You'd best be ready for it.

As a loan officer, I watch real-time mortgage market data that's not published to the papers or on TV. If you need to know what rates are doing, you need to be watching my Twitter stream, or following me on Facebook. I post regular updates and tend to alert before rate sheets change.

If you need to lock a mortgage rate, make sure you're getting my updates.

Furthermore, if you're actively rate shopping for a home in Cincinnati, Chicago, or somewhere else that I lend, make sure you ask me for a rate quote. Because I work for a self-funded bank, my rates and fees are often less than my broker peers and especially better than the correspondents.

Be sure to ask me for. I love to work with my readers.