After a whirl-wind trip to Washington, D.C. to lobby on behalf of consumer choice and housing issues, I come back to lower fixed rates. Not bad.
How low? We’re not talking spring of 2013 low, so don’t get too excited, and we’re not going back there. But these days dips in rates are something to get excited about. After all, pretty much everyone who is in the know agrees that interest rates are in a slow, sure, unsteady march upwards for the next couple of years. So when news and economic reports combine to dip the rates down a little, it’s an opportunity for consumers to take advantage of the market and lock in a favorable rate for 30 years.
In this case, the situation in the Ukraine combined with some weak economic news and rates improved a bit last week. For the week ended Thursday, the 30-year fixed-rate mortgage averaged 4.28%, compared with 4.37% a week earlier and 3.52% a year earlier. Rates on 15-year fixed-rate mortgages averaged 3.32%, compared with 3.39% the previous week and 2.76% a year earlier.
It is important to note that these rates are for Freddie Mac conforming loans for A-paper borrowers with verifiable income, excellent credit and solid equity in single-family detached homes. Your mileage may vary. Also, these are average locked rates. It does not account for whether the average borrower chooses to pay points to buy down the interest rate or not, so any one individual week can be off but long-term trends tend to smooth out the bumps.
It’s also important to note that by the time you read about interest rate going lower they’ve usually started to rise. Why is that? Because the Freddie Mac conforming interest rate report reports interest rate last week, and what you care about is what interest rates are today.
If you look at the chart above, you’ll notice that rates bottomed out on Thursday, February 27th and again on Monday, March 3rd.
I have long contended that a good locking strategy will save you more money than anything else you can do. How much? As an example, I have a loan in process that would have cost $1,200 at the target interest rate on Friday, and $300 at the same interest rate on Monday. $900 in savings on lender fees goes a long ways toward other fees you pay in the transaction, or can be used to buy down the interest rate. Either way, you save.
Locking on the lowest possible day is rare, although it does happen. What happens more often is that we get close, and save hundreds or even thousands of dollars over locking carelessly or thoughtlessly.
Rates are still much better than they were at the beginning of the year, however, and we may yet have another dip or two before they start trending back up again.
My name is Casey Fleming, and I originate mortgage loans in California. I am based in Silicon Valley.
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