My thoughts on 5.5% . . .

That’s right.  On Wednesday, mortgage rates jumped up more than 0.5% over the course of a few hours — most lenders re-pricing and re-publishing rate sheets four times over the course four or five hours.  Some lenders (obviously throwing the towel in for the day ran 30 year fixed rate pricing all the way up to 5.75%).  Wednesday’s events should give a new perspective to interest rates in the 4’s to any of those home buyers or would-be refinance’rs in the waiting . . . waiting for “lower” rates; and it has caused me to shift my advice to clients.

If you keep up with some of my previous posts you will recognize “Plan B” for refinancing your mortgage and for positioning yourself to get the lowest possible rate on a new mortgage — a plan to start the loan process and have your loan approved and then take advantage of the preferred pricing of a short-term lock-in.  While “Plan B” worked very well for the past four to five weeks, my advice (after Wednesday’s market debacle) is now changing.  To call it “Plan C” would imply that I might come back with a 23 more plans as I work my way through the alphabet, so I won’t do that.  I will simply call it what it is . . . my advice.

Below is a portion of an email that went out on Thursday afternoon to my clients with loans currently in process:

“In case you missed this morning’s headlines, yesterday was a dramatically bad day for mortgage rates.  Over the past few days, mortgage rates had inched up slightly higher (trading at the top of the range of where they had been over the past months).  AND, over the past few days, even when the market had done poorly and moved in the wrong direction, mortgage rates were moving up only slightly, and moving “UP” to 4.75% and 4.875%.  But despite the range of the past few months and despite some technical markers that could have acted to help slow mortgage rates from moving up further, things moved up 0.5% or more yesterday alone.

Yesterday was the mortgage bond market’s worst single performing day since October of last year.  Why? 

Well, my advice has been that as long as the outlook for the economy remained grim and as long as the Feds are committed to purchasing mortgage backed securities, then interest rates should stay below 5%.  Yesterday’s move in rates had some to do with supply and demand and some to do with “speculative” economic outlook — the over-supply came in the form of a 2 year treasury auction; and the economic outlook was the start of the buzz of economic recovery in the distant future — good news that is good news simply because the news is not as bad as it could be.  A great example of this strange truth is this morning’s initial jobless claims — better than expected, because jobless claims fell by 13,000 to 623,000.  The bottom-line, still a loss of 623,000 jobs.
As mortgage rates moved up quickly yesterday (quicker than you could catch), the idea of locking-in would have at that point, been an exercise in locking-in at the TOP . . .
So, here are two points and then my advice:
  • The White House “Home Affordable” Program, just launched this month, will be severely slowed down if mortgage rates remain above 5%; it’s my opinion that the Feds and Treasury will be even more aggressive in the coming weeks to purchase mortgage backed securities to try and drive rates below 5%
  • Last week (and a few isolated days since the beginning of the year) have proven that 4.625% to 4.75% for a 30 year fixed rate loan is very close to the bottom (if not the bottom) of where lenders are willing to offer mortgage rates
These two points, along with yesterday’s drastic jump in mortgage rates are forcing me to change my advice towards locking-in your rate for your refinance.  My advice now is to get the process started and to wait on a specific target rate of 4.625%, 4.75%, 4.875% or 5.0% and to be prepared to lock-in if and when that interest rate is available (on a 15 day lock in your loan is approved, or on a 30 or 45 day lock if your loan is in process).”
If you are reading this post thinking that it might be time to look in to refinancing your mortgage, or starting the process of looking for a home to purchase, the answer is yes.  You should start.  You should start today.  Seriously.  As of today (Friday), the market has already gained back 50% of it’s losses from Wednesday and could be below 5% in the very near future. 

Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit


One Response to “My thoughts on 5.5% . . .”

  1. jeffdmorgan Says:

    I don’t know anything about mortgages, but I actually enjoy the blog. Only you could pull that off. Thanks for the sound advice on the recent refinance. With your help, it sounds like we snuck in there just in time!


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