Update: Lender changed rate +0.75% days before closing

I read this as another data point indicating that the powers that be are betting rates will drop soon ("soon" measured on quarters, not in years). I could be wrong and they could be wrong, keep in mind.

OP as consumer is reading this as: "I wanted 4.5% they wanted 5.5%, I held my ground, so I won and that's that!"

Not since 2008 has the person you speak with, the loan officer, been allowed to take a pay cut to get you a lower rate (or a pay bump to convince you to take a higher rate), so it's above their level, up in management, where they're taking the longer view. And from that view, here's the choice:

  • We have a person who feels plausibly that they should get 4.5%, and we strong-arm them into 5.5%. They refinance in 6 or 12 months, and we probably lose money if that happens.
  • We have a person who feels plausibly that they should get 4.5%, and we give them 4.5%. We keep a small percentage of our loans on the books for 6-24 months anyways. So we just keep this one on the books, and sell it when 4.5% is in the ballpark of where rates are at. And at that point we will hopefully have a "seasoned" loan with 6-24 months of on-time payments, allowing us to sell it for more than the other 4.5% loans that are not seasoned.

It's telling that this just happened, and it didn't happen a month or two ago. I don't think it would have happened a month or two ago, we're seeing lots of little anecdotal "market signals" (both here on reddit, and for me IRL doing mortgages every day) in the last three weeks or so, for example the "in house" lenders of builders are more willing to sell mortgage options (aka "long term rate locks") at cheaper prices, meaning if the consumer wants to bet on rates going up and they want to bet on rates going down, they're TAKING those bets (two months ago, no one was taking those bets, and/or were charging more for them), and/or taking them for lower prices (0.5% or free, with a pseudo-fictitious non-transparent float-down, instead of 1% or 1.5% with no float down option).

The obvious follow up is "why not just do ALL the non-jumbo Fannie/Freddie loans at 4.5%?!" -- the above choice works if it's a small percentage of the total loans being done, as a hedge, but you don't necessarily want to place ALL your eggs in that basket. The mortgage banks also can't necessarily float ALL the loans for some indeterminate amount of time while waiting for rates to drop (the resale of your loan is where the funds come from to lend to the next family, otherwise they'd have to collect 10-15 years of payments from you to be able to do the next loan), even a low single digit % (1% or 3%) would be a stretch.

/r/RealEstate Thread