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Rates – “Sticky” Down; “Slippery” Up; Why We Like to Lock

Rates - "Sticky" Down; "Slippery" Up; Why We Like to Lock

Rates moved higher today primarily in response to the removal of tariff threats with Mexico.

I mention often how good economic news (regarding employment, retail sales, GDP growth, trade, etc.) usually moves rates higher while bad news tends to push rates lower.

But, the market’s response to good and bad news is not always proportional.

The phrase we hear often in the mortgage industry is that “rates are sticky down and slippery up,” meaning rates usually move down much more slowly than they move up.

MARKET IS JITTERY

The market overall is like a jittery human walking down a dark alley; that person will react calmly to no news or good news, but a loud scary noise will send that person running for safety.

The market becomes particularly jittery whenever rates hit a low point like we saw last week.

Even if rates seem to be trending down overall, whenever rates hit a trough or a low point like we saw last week, we encourage all borrowers to lock in their rates (for both purchases and refi’s) as soon as possible.

This is b/c the risk of rates bouncing back up is relatively high.

In fact, we have dozens of refi offers out right now to borrowers who were reluctant to lock last week b/c they thought rates would continue trending downward.

But now that rates have moved upward, we are no longer able to offer those rates to many borrowers.

SUPPLY AND DEMAND

Supply and demand within the lending industry is another key reason to lock when rates ebb.

Many lenders and investors can’t handle the increase in business that results from rate reductions.

As a result, they sometimes increase their rates simply to ward off excess business even if rates continue to trend downward overall.

Anyway, we like to remind borrowers that they should always “get while the gettin’ is good” (and not wait for the gettin’ to get better b/c it often doesn’t).

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167