Oops, 'they' just missed the boat! These are people who think they're genius instead of locking the rates - floating the rates - waiting for rates to come crashing below 4.5%! Now, they might as well kiss goodbye to it. Interest rates spike up to float around 5.5% from under 'the rock' of five percent last week.
With respect to yesterday’s in the mortgage market — yes, it is as bad as you can imagine. No call can be made on the near-term, however, until we see where this settles out over the next week of so. If rates do stay in the mid 5%’s, the mortgage and housing market will encounter a sizable stumble. The following is not speculation.
This is what happens when rates surge up in a short period of time - I lived this nightmare many times. Yesterday, the mortgage market was so volatile that banks and mortgage bankers across the nation issued multiple midday price changes for the worse, leading many to ultimately shut down the ability to lock loans around 1pm PST. This is not uncommon over the past five months, but not that common either. Lenders that maintained the ability to lock loans had rates UP as much as 75bps in a single day.
Jumbo GSE money — $417k - $729,750 — has been blown out completely with some lender’s at 8%. I have seen it all in the mortgage world — well, I thought I had.A good friend in the center of all of the mortgage capital markets turmoil said to me yesterday“feels like they [the Fed] have lost the battle…pretty obvious from the start but kind of scary to live through it … today felt like LTCM with respect to liquidity."
Mortgage rates went up swiftly this week, and some would-be borrowers lost out dearly because they had not locked while rates were extremely low.
The question is: What should they do now?
When applying for a mortgage, borrowers are given the option of locking or floating. When you lock a rate, that's the rate that you will get if you close on the loan by the lock expiration date. A lock protects you against a rate increase. But it's also a commitment that you will pay that rate, even if rates fall between the day you lock and the day you close.When you float a rate, you're keeping your options open. If rates drop, you can lock then and brag about how smart you are. But if rates rise, you might get stuck with a higher-than-desired rate and monthly mortgage payment.
On Tuesday and Wednesday, mortgage rates went up half a percentage point or more. The increase was abrupt and startling. For people who had already locked a rate and who were on track to close on time, the jump in rates was no big deal. But for those who were floating, this week's rate rise could be costly.