RateWatch October 28 – Sustainable? Depends on what you mean.

Markets: The bond market has reversed itself the last two days and is headed higher once again.  It has broken through a couple of lines of resistance and is now trading at what my sources say is “an unsustainable level”.  More on that below.  Current levels on the FNMA bond correspond to 30-year fixed rates below 5%, though not very much below.  Still.

Analysis: What is the definition of “unsustainable”?  If you ask me, unsustainable means “you can’t keep doing this forever”.  These days, it seems to also mean “you can’t keep doing this for long enough to matter,” as when a football team grabs an early lead through fancy trick plays, but shortly runs out of those and cannot sustain the advantage.  It matters which we’re talking about, because the bond market certainly is in Unsustainable 1 territory, but not – again, just as clearly – in Unsustainable 2 territory.  We know this because we’ve been here before.

So we’re here, and we’re here long enough to matter, IF.  It is absolutely true that most lenders (and this is especially true with the new federal babysitting regulations) cannot react fast enough to help you take advantage of rates that will be abnormally low for only a few hours.  It is also true, however, that some lenders can, and the number that have that capability can be increased by your timely action.  DO NOT WAIT FOR RATES TO HIT YOUR TARGET ZONE BEFORE YOU START TALKING TO YOUR LENDER.  That’s not going to work, people.  For most, a couple of hours is just not enough time to get all the documents whizzed back and forth before a lock becomes possible, not with rates moving with this kind of volatility.

Since I already used the running analogy last time, let me use a hunting one here.  If you think you’re going to get the perfect shot on a deer by waiting for the deer to get in the right area, then going in after it, you’re crazy.  The way to make sure of a good shot is to get there first and wait.  Similarly, the way to make sure you get the rate you want – and 15-year rates are in the very low 4s right now, for instance, with 5-year ARMs in the mid 3% range – is to get your documentation together and go over it with your lender BEFORE you need to shoot.  That gives you the very best possible chance to get exactly what you want.

These days, a couple of extra days is a godsend.  Get moving now, and give yourself a break.


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