Interest Rate Level as Regulator Valve
Anyone in the market for a new mortgage -- or trying to refinance an existing one -- can attest to how volatile interest rates are today.
Certainly, one key ingredient is the unprecedented uncertainty in the credit markets. However, another, more recent factor is understaffed lenders.
According to local mortgage broker Alex Stenback, lenders have cut back staff to the point that they simply can't process high volumes of mortgage applications (at least not quickly).
When they're overwhelmed, they turn off the application spigot by raising rates; when they're caught up or want to attract more business, they open the spigot back up by lowering rates.
That's just one more reason for consumers to watch rates more closely than ever. Practically, that means choosing a with-it lender or mortgage broker who'll do that for you . . .
Tuesday, February 3, 2009
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In addition to weird and unpredictable interest rate movements, a second order impact of high volume is slower processing and underwriting turn times develop at many lenders (trhe bigger the slower, generally)
Most lenders hold the line on purchase transactions, and underwriting seldom takes more than 5-7 Days for a purchase money mortgage. But, when volume spikes, refinancing turn times often extend to several weeks or more depending on the lender.
Many of the larger banks start mandating interest rate locks of at least 60-90 days. That can cost you .125-.25% in rate. You won't be told this by your bank
I've coined a term for this. The Hipponary Effect:
http://behindthemortgage.com/behind_the_mortgage/2009/01/coining-a-term-the-hipponary-effect.html
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