Mortgage Rates Skyrocket Overnight, Keep Calm

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May 30, 2013 | By RGR Marketing Blog

This week we saw a spike in mortgage rates like we haven’t seen in years. Everyone has been keeping an eye on the rates this year, seeing them slowly creeping up and speculating on where they would stop and if they would keep going up.

We’re not saying that rates hit record highs, but we are saying that on a day to day comparison, the rate jump we saw on May 28th was record-breaking and extraordinarily high. Rates went from 3.75% for the 30-year loan to 4.0% overnight. This is a bigger increase than the infamous “Black Wednesday” which refers to the worst day for mortgage markets in 2009.

What may have caused this spike? There are many ideas on this, and of course no one can say for sure. Our theory is that the threat of Fed curbing its asset purchasing coupled with the unexpectedly positive Jobs report caused this jump in rates. There has also been talk about regulations coming into effect this summer and the Federal Reserve slowing their stimulus of the mortgage market. All of these things could have influenced the rates and caused the jump.

Now you will likely find articles about people panicking over this jump. It is definitely an increase that will slow down the amount of consumers who will be looking to refinance. What we want to point out is that these rates are nowhere near all-time highs! Just 5 years ago, rates as high as 6 or 7 percent were not unheard of. There is a large percentage of the population with Adjustable Rate Loans who have yet to refinance because their adjustable rate kept adjusting downward. As rates are increasing they may be looking to lock into a longer term fixed rate. This could open up a whole new refinance market to us.

“We all know that a substantial/dramatic rate increase like we recently saw will unfortunately have a negative effect on refinance lead volume as well as lenders’ conversion rates on those leads. We've seen this multiple times in the past. Rate trends are cyclical; they may continue to rise or they may fall again before we see a more permanent increase that most people think is inevitable.” said Silas Ellman, Executive Vice President of RGR Marketing.

With the rates going up, lead generators and mortgage lenders will need to team up to figure out how to drive targeted lead volume that will still convert to closed loans. There are still homeowners who bought their property years ago who have rates at over 5-6%. Many of those homeowners have been paying their mortgage on time but have not been able to refinance because of the tight restrictions set by the banks. We are already seeing banks starting to loosen some of the restrictions that have been in place since the housing bubble burst years ago. As rates continue to rise it’s quite possible more and more restrictions will be lifted. That could allow more homeowners with self-reported income, LTV ratios over 80%, borderline credit and larger loan amounts to finally refinance into a lower fixed rate mortgage.

Now, what do we do at this point? We all put a plan in place assuming the rates aren't coming back down and hope we are pleasantly surprised when they do. We keep an eye out for possible new government programs like HARP 3.0, which should help some people who have previously been unable to refinance. Planning ahead and staying informed are the best ways to cope with mortgage rates going up.

What do you think about the latest rate increase? Do you think these rates are here to stay? Leave a comment below and let us know what you think.

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This week we saw a spike in mortgage rates like we haven’t seen in years. Everyone has been keeping an eye on the rates this year, seeing them slowly creeping up and speculating on where they would stop and if they would keep going up.

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This week we saw a spike in mortgage rates like we haven’t seen in years. Everyone has been keeping an eye on the rates this year, seeing them slowly creeping up and speculating on where they would stop and if they would keep going up.

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