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Mortgage Rates Under 3% For The First Time (Again)

The average lender continues to quote conventional 30yr fixed rates under 3.0% for top tier scenarios.  You may see media outlets talking up this “first ever” dip below 3.0%, but this is actually old news.  We’ve been discussing sub-3% rates for several weeks.  The slow-moving surveys that fuel the average journalist’s mortgage rate coverage are just now getting caught up to reality.  The bond market is the primary consideration for interest rate levels and investors have remained eager to buy bonds for a variety of reasons.  Stronger buying demand means higher prices and when bond prices rise, rates fall.
But in and of themselves, higher bond prices aren’t enough to ensure mortgage lenders will offer lower rates.  There is only so much capacity in the mortgage lending system.  If lenders drop rates too much, too quickly, it can lead to several negative effects.  The most obvious and logical effect would be an overloading of lenders’ operational staffs.  This can lead to longer turn times and, paradoxically, higher rates as lenders attempt to stem the tide of refinance demand.  
From an investment standpoint, when rates drop too quickly, it also hurts the value of the underlying mortgage bonds.  Reason being: investors pay a premium for the privilege of collecting interest over time….(read more)Forward this article via email:  Send a copy of this story to someone you know that may want to read it.
Source: mortgagenewsdaily.comNew feed

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