One of the things that can be difficult about shopping for a mortgage, or for a mortgage provider, is that as you make contact with a few people and ask about rates, the ground is shifting beneath your feet.Call one lender first thing in the morning, email two others at lunch, one of whom doesn’t reply until the end of the day, and you’re looking at three different ‘vintages’ of rate quote. Can a fair comparison be made?

Maybe.

But you’ll need to know first if rates have changed over the course of the day. And based on recent history, odds are you’ll be comparing apples and raspberries.

But when it comes to mortgage quotes, the little differences can be meaningful. If you want to maximize your shopping results, you need to make sure you are comparing quotes from the same vintage.

 

Rates changed ever 2.71 hours in March

In March there were 23 bond trading days. We received 53 rate sheets over those 23 days, or an average 2.30 rate sheets per day. We had a few calm days with only one issue of rates, and the most extreme day had 5 different rate sheets. That was yesterday, attributed to some pre-jobs data jitters.

Most lenders have open lock desks for 8 hours a day. Some are open for 9, and the most aggressive lenders, often the most sensitive to bond market fluctuation, accept rate locks for about 6 or 6 1/2 hours a day. On turbulent bond market days, they often delay the first rate sheet release.

Assuming an average of 7 hours for an open lock desk, and 2.30 rate sheets per day, that means rates changed every 3.04 hours. Compared to January’s average expiration of 2.71 hours, that’s 12% less volatility for March. February was less volatile than January also, so this is now a 3 month trend of decreasing volatility, but this is by no means a placid market.

Only A Partial Picture

Lower volatility is a good thing. It takes some anxiety out of the process for working through a purchase or refinance transaction, and it also tends to help reduce defensive pricing by lenders, giving them greater confidence to be aggressive.

But volatility only provides part of the picture. During the month of March, mortgage rates went on a round trip, dipping for the first half of the month to a low point on March 16, and then climbing back to where they began the month for a net break-even. If you were in escrow looking to lock your rate, you’d not only want to know about vintages for comparing quotes, but when in the month would be the best time to lock no matter where you do it.

How to stay in front of it

First, make sure you get your rate quotes in the same vintage. This means that any lender who isn’t quick to reply isn’t really helping out. Second, make sure your lender is tuned in to the economic calendar, so that you can be aware of what days are more or less likely to be volatile ones. The market gets little economic data snacks to munch on every day. It’s critical to know which ones are bigger, might cause indigestion, induce vomiting, etc. The last thing you want to do is leave your rate lock open when the risk is greater than the potential reward.

Working with your lender to create a lock and pricing strategy suitable for your transaction will probably shed some light on who you’re working with, and serve you far better in the long run than comparing apples and raspberries.

Need help with a rate lock strategy? Contact me below and tell me how I can help.