Mortgage rates swinging wildly day to day, varying more dramatically lender to lender, during the volatility sparked by the coronavirus.
As the economy went into free fall from the coronavirus, the risk for lenders only increased, and that risk is necessarily priced into mortgage loans.
As investors and financial markets struggle to find their footing during the coronavirus pandemic, the effects are hitting consumers where they live – in mortgage rates. Not only are rates swinging wildly day to day, they are varying more dramatically lender to lender. Then there's the Federal Reserve. The central bank not only lowered its rates to zero in response to the crisis, but also began buying mortgage-backed bonds. That artificially increased investor demand, but at different levels every day, adding to volatility in rates. It also caused a massive rush by consumers to refinance.
"One of the big things we're trying to figure out, and I think this is why rates are all over the place is this," said Tuli. "If before corona, out of every 10 applications we took, nine closed, so you can hedge your interest rates. Now, of every 10 applications, how many close? We don't know. People are losing their jobs in real time or they don't want to let the appraiser in their house.
And as rates vary so widely day to day and lender to lender, consumers are caught trying to play a game that has never been played before. Borcherding attributes that to various factors: Lenders' costs to hedge their loans against rate changes, as well as volume issues. Some lenders are just near capacity, so they're not really driven to lower rates. Some lenders may not have staff willing to work full time because they're at home taking care of children.
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