Mortgage Blog

Sorry for not being able to post much on tzlc recently.
I saw that there are more and more questions about
why the rates not going lower. Hopefully this
post can help you understand a little bit.

1)For most lenders, they will sell the loans(
Fannie, Freddie or other investors). So basically
there are corresponding coupons for the bonds.
Sometimes, when the trading coupon is not ready,
there is no lower rates. For example, there are
no rates lower than 3.25% for 10 yr fixed or 15
yr fixed rates.

2)Lender's pipeline management. Whenever the lenders
have enough loans in the locked pipeline, they
may not lower the rates to attract new clients,
they will close the loans in the pipeline first.
And then gradually lower rate depends on the market.

3)Some rates have bottom rates. Like 5/1ARM rate,
technically, it can not go lower than 2.25%. So usually
5/1ARM rate 2.25% to 2.375% is the bottom, and the
lender's profit margin rate is very low for thoes rates.

4)15 Yr fixed will hit the bottom as well. The current
lowerest rate is 3.25%. And there is no lower coupon
yet. We will have to see the coupon first before we
can have lower rates. IF we can have lower rates, 3%
will be the bottom(my guess).

5)For 30 yr fixed, there is no lower rates than 3.75%
yet. So it's impossible to have 3.625% rate or lower(
even if you pay points) at this moment. Again, until
those trading coupon is ready.

So someone asked me whether you they can 3.625% for 30
yr fixed or 3.125% for 15 yr fixed. Now you know why,
there are no such rates on the market yet.