Mortgage rates may have spiked to their highest levels in about 8 months two weeks ago, but they have fully recovered as of last Thursday. Since then, very little has happened and not even the 30-year average for higher-level scenarios has changed. On recent hikes, many lenders have been in the 7% range. Some are still over 7% – especially for bids that don’t rely on upfront costs to bring down the price. As always, the going rate should be thought of in two parts: 1) the “note rate” that applies to the principal balance and forces the monthly payment and 2) the upfront costs (whether in the form of creation points or deductions) that go to the lender to secure a lower rate. These upfront costs are either paid out of pocket or added to the balance of the loan, so they must be taken into account in any attempt to track price changes in an environment where they are as prevalent as they are now (i.e. more widespread than historically normal). All of this means that there is a wide variety of mortgage rates out there. A lender offering 6.625% with 1 point debit is actually making more money than a lender offering 7.125% without points! Sideways sentiment is likely to start to abate by next week’s Fed announcement – not because the Fed is going to surprise anyone by raising interest rates again, but because the market wants to hear from Powell if the collective assessment of inflation expectations has changed in the past six weeks. From there, incoming economic data in the next two weeks will be used to determine whether prices need to revisit recent ceilings before embarking on what everyone hopes is a steady return towards more livable levels.
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