Mortgage rates rise sharply from last week’s record low

Rates jump as much as 1 percentage point as lenders are overwhelmed by mortgage applications.

The lowest 30-year fixed mortgage rates in modern U.S. history imploded midday Monday, moving sharply higher. Many mortgage lenders raised their rates several times on Monday, Tuesday and Wednesday.

A well-qualified borrower could get a 3% rate on a 30-year fixed rate without any closing costs on Monday morning. Absolutely astounding! By Wednesday afternoon many lenders were offering that same no-cost loan at 4% or even higher.

The 10-year Treasury bond yield (which 30-year mortgage rates tend to follow) briefly hit a record low rate of .318% early on Monday, then making a dramatic U-turn, ended the day more than 22 basis points higher at .54%. By Wednesday, the 10-year was up another 28 basis points, ending the day at .82%.

Man alive! How can this be happening when it seems like the whole world is running away from the stock market and hunkering down in a flight, no, a stampede to pouring their money into the quality and safety of U.S. Treasurys?

The answer: There is an oversupply of borrowers wanting mortgages and the mortgage industry does not have the labor force in place to handle this refinance loan application surge.

Dave Stevens, retired president and CEO of the Mortgage Bankers Association, points to waning investor demand and mortgage lender capacity challenges.

“Investors are lowering bids. (Loan) servicing bids are getting cheaper,” said Stevens. “And staff is overwhelmed.”

Wells Fargo Bank is protecting you by locking in your rate with an equivalent rate-lock period.

“Right now, we’re locking rates on refinance applications for 120 days, and that is proving to be sufficient time to close for most customers,” said Wells spokesman Tom Goyda.

Chase Bank would not provide timelines or associated rate locks. Spokesperson Keosha Burns said Chase is shifting resources to handle the increased volume, closing loans fast and on-time.

If you got your loan locked and you are on your way to funding, congratulations!

If you missed the window, well, now what?

Consider your current mortgage against today’s market rates. Rates are still darn cheap. If you can get a no-cost loan at a lower rate than what you have now, just do it!

You also should consider shortening your loan term or pulling cash out.

Chances are great that the coronavirus will have long-term repercussions on the global economy. It’s an easy bet to see a big, bad recession coming as a result of this pandemic. Once these mortgage application lines clear out, rates will likely drift down again, and perhaps down even further. Yes, you will get another bite at the apple.

Learn from this week’s rate gyration and do the following:

1. Don’t get greedy. If it’s a good deal, lock your rate down and stop trying to outguess the market. Listen to your loan officer. He or she is the expert. If you are not confident in your loan officer, find a smarter one.
2. Be the borrower of the month. Provide the documents to your lender exactly as required, and, as soon as possible. Complete packages always go to the front of the underwriting line.
3. For the love of peace, do not take photos of your tax returns and bank statements and text them to your lender. The documents are almost never legible, and its very time-consuming for your loan processor to organize and format. Take time to scan and email.
4. Understand there is a mortgage application logjam with longer turn times for loan processing and underwriting, employment verifications, payoff statements, appraisal reports, proof of fire insurance and the like. Better to kill your loan processor with kindness than impatience.
5. Do not discuss your property value with the appraiser, said Lance Siegel, president of HVCC Appraisal Ordering Service.