I was writing in my Market Update that Lenders have been incredibly difficult.
The frustration I am hearing from clients in getting loans is
reminiscent of the Richard III line “My kingdom for a horse,”
except that in this case there is a stable right in front of them!
As clients continue to refinance and purchase, I am surprised at the level of underwriting scrutiny that cooperative and condominium buildings are going through, not to mention that of buyers themselves.
So of course I write about limbo, but the kind where buyers are trying to get under a bar, which seems to be VERY low.
Just as low as the rates are now.
At the time of this writing, rates are nearing 3% for 5-year interest-only mortgages, near 4% for 15-year fixed mortgages, and nearly 4.25% for 30yr mortgages.
We are in historic territory.
Not every mortgage broker is cut out to handle the challenges of these times, including explaining to busy professionals why lenders are being so touch when they are putting 40% down on a purchase.
Especially when there are still 3% down mortgages available in areas outside of New York City.
First, lenders seem to be penalizing cooperative purchases, which often take over 60 days to conclude.
The rate lock periods often expire before sales can transact, and rates are actually higher on a 60-day lock.
I would argue against locking a rate now, except on a condo purchase, until a board package is submitted.
The mortgage market doesn’t react directly to the Standard & Poor’s (S&P) downgrade of the United States’ credit rating from AAA to AA+ was historic.
The yields on the 10-yr treasury are the benchmark- and as stocks become too risky, rates should go down.
And they have done just that.
Olga Savelov of Universal Mortgage reminds me that S&P is the only rating agency that has downgraded US debt.
Further,
she argues that the ongoing credit crisis in Greece and other parts of Europe means that US Bonds are still considered one of the safest places to invest.
I looked back at my recent newsletters, that we thought
August might be a month in which to worry…nice to pretend we have a crystal ball from time to time.
Frank Cronin of HSBC writes,
“Rates are not going any lower.
Even as the bond tanked and stocks dropped, mortgage rates did not follow because they are their bottom, if you include a bank’s cost to borrow, necessary margin and cost to service a mortgage that is the rate you see today.
Rates today are derived from the 3 factors above and to go any lower would mean banks would be lending in the red. I think consumers should feel confident that last week’s volatility showed that mortgages rate are at their bottom.
Olga concurs.
She says, “The bottom line is that home loan rates remain near their historic best levels,
and about the only thing that is certain in the markets right now is the volatility.”
Ultimately, if you’re reading this to get a larger view of rates- I would say with some certainty that they can’t go much lower- so enjoy them while you can.