Mortgage rates rose moderately today depending on the lender. It is worth noting that the prices for lenders are currently extremely stratified. In other words, some lenders have taken great strides today and some have not. The differences between lenders are nothing new, but the point is that they are increased and persistently volatile. This started after the pandemic hit the financial markets a year ago this month, but it has spiked over the past week as lenders grapple with new restrictions put in place by regulators (via Fannie and Freddie, collectively ” the agencies “).
These restrictions limit the amount of certain types of loans that can receive the agencies’ approval stamp. Lenders who were over the limit had to raise interest rates on these loans suddenly to lower their circumstances again. Other lenders preemptively raised interest rates to avoid flooding.
The affected loans are only for the time being investment properties and second homesHowever, our review of multiple lender interest rates suggests that multiple lenders have increased interest rates on other types of loans as well. Another complication is the fact that the lenders involved do most of their business with funding for smaller lenders and the smaller lenders have made defensive adjustments on their part to avoid surprises as the larger lenders make their own adjustments. The net effect is an average conventional 30 year fixed income offer easily the highest in a year.
Tomorrow brings that Federal Reserve latest policy announcement. The markets are not looking for a chance in terms of the Fed Funds rate or bond buying policy. Rather, the focus is on a Covid Relief policy that enabled banks to buy more bonds. The rule expires at the end of the month and the Fed could comment or possibly even extend it tomorrow. If it were to be extended, prices would likely agree. On the flip side, if Powell suggests it doesn’t extend, we’ll likely be talking about more new highs around this time tomorrow.