Gm. This is MF Lending - the buzzer-beater of mortgage newsletters. We’re the fool-proof way to serve up mortgage and real estate market knowledge without any of the guesswork. So you’ll look like the smartest agent in the room (and you are!)

Here’s what we’ve got for you today:

1. Discount points are more critical than ever 🟪

2. ECB Raises Rates in the face of a banking crisis 🧨

3. Market by the Numbers 💸

Nuwave Rates Today - 📉

🟪 Discount points are more critical than ever

Notice anything abnormal about the rates today? Other than the fact that they went down as we watched the banking infrastructure crumple?

Look at the spread in interest rate between no points and one point.

Typically, a single discount point will decrease the interest rate on a loan by about .25% - today it is .5%

Why?

The turbulence in the market is making the entire secondary market uncertain of how to price mortgages.

Here is a live look at the secondary desks for every mortgage company:

The market - especially the bond market - hates uncertainty.

Put simply, discount points are prepaid interest. This is interest paid upfront to the mortgage company today, for a lower rate over the life of the loan.

Mortgage companies, today, will happily take your money now instead of over a 30-yr period. They are incentivizing it with these prices.

With a single point, you can drop your rate by .5%. With two - a full 1% lower rate.

The best part - with buyer sentiment at a record low - you can easily get the seller to pay for it.

If you have buyers looking to purchase a home, there is no better time than right now to go shopping for a bargain.

ECB running its economy into a brick wall 🧨

Credit Suisse - the most recent actor in the banking saga, took a loan from the Swiss Central bank:

“to bolster confidence in the country’s second-biggest lender and blunt concerns about the international financial system…”

AP News

Due to the exposure to duration mismatch (as we saw with Silicon Valley Bank) Credit Suisse turned to the Swiss Central Bank to get bailed out.

Despite this desperate attempt to stabilize the banking system, the European Central Bank raised rates another 50bps today.

To say the ECB is “out of touch” would be an understatement. The FED should be watching these actions closely to avoid a global banking meltdown.

We are overmedicating this inflation problem. Shelter costs are coming down (as we saw in the last CPI print) which is 41% of CPI. But it takes time for this to cycle through the system.

The FED cannot keep raising rates. They must hold rates where they are and let the economy come up for air.

Next Wednesday, Mar 22nd is the next FED meeting. If we see another rate hike, expect more issues with regional banks.

Boston FED CEO - Eric Rosengren said it best yesterday:

Over the next few months, we should see a slowdown. This will improve mortgage rates

Let’s hope JPow is not asleep at the wheel on Wednesday.

Market by the Numbers

1. New Listings down 16% YOY - [Impact: Stable/Rising Prices]

2. Affordability - payments up 44% YOY [Impact: Lower Prices / Higher Concessions]

3. Single Family starts down 32% - [Impact: Rising Prices]

Inventory is still historically low. A key indicator will be when inventory starts increasing in 2023 - so far inventory has declined about 16.0% over the first ten weeks of 2023.

Single Family housing starts and permits are down 32%. This will keep inventory low.

Key Dates to Mark on your GCal & Potential Impacts

1. Mar 22nd - Next FED meeting

2. May 10 - Expectation for when shelter costs will finally reflect reality

That’s all we have for today. Share and Subscribe here 🙂