Chase reruns its 0.25% mortgage rate sale for a third time in just over a year

Chase's discount is a price with an expiry date. For 21 days ^[1] the bank takes up to 0.25% off the rate on new purchase and refinance loans, by amounts that differ by state, and the offer ends after Oct. 4 ^[3]. A lender that wanted to lower its price on every new loan would cut its standing rate. Chase has run the same weeks-long sale three times in just over a year ^[6]. Each time it has been open to new and existing customers and could be combined with the bank's other offers, grants and discounts ^[4].

Three readings fit that pattern. Volume is the obvious one, and Jeffrey Edwards, founder and CEO of FFERM Technologies, put it first on his list. "Banks are facing fewer originations, expensive deposits, low-yielding assets that remain on their books longer and borrowers taking on greater future payment risk. Those pressures cannot be measured separately because one can quickly amplify the others," he said ^[2]. A second reading is marketing: a promotion that recurs on a calendar can run whatever volumes are doing. The third is funding. Wells Fargo bases its rate discount or closing-cost credit on combined eligible balances, including money added before the mortgage is final ^[8]. Part of that mortgage discount is therefore a price paid for the deposits Edwards calls expensive ^[2].

I think the volume reading holds up best. The Chase offer is designed to reach as many loans as possible: both loan types, both new and existing customers, and discounts that combine ^[3][4]. The roundup does not include origination figures for any lender, so the view rests on how the offers are built and on Edwards's account. It would be wrong if Chase's volumes were flat or rising going into each sale, or if a fourth sale runs in a quarter when originations are up.

The permanent cuts are paid in cash up front and go to narrower groups. Bank of America has put over $15 billion in affordable home loans to more than 57,000 buyers since introducing its Community Homeownership Commitment ^[7]. That is about $263,000 a loan ^[2]. Its grant of up to $17,500 is about 6.65% of that average ^[3], and borrowers can use it to buy down their rate for the life of the loan, Matt Vernon, head of consumer lending, told National Mortgage News ^[6]. Wells Fargo is "working with builders to provide rate buydowns to their customers," Sandra Ho, head of sales and strategy execution for Wells Fargo Home Lending, said ^[13].

Citizens complicates the volume-pressure reading, because it is building the capacity to reprice often. Its nonagency and state-agency products are permanent additions ^[10]. Raman Muralidharan, head of mortgage, said its new pricing engine, Polly, lets the bank bring product and pricing changes to market faster and support more dynamic pricing decisions ^[11].

Navy Federal Credit Union has the most exact deal term in the set. After at least six consecutive on-time payments, an eligible borrower can lower the rate by at least 0.25 percentage point without refinancing, for $250 per cut ^[9]. The lender's gain, as I see it, is that a cut made in place gives the borrower one less reason to refinance elsewhere. A quarter point on a $100,000 balance saves about $250 in the first year of interest ^[4], so the fee pays back in roughly a year at that balance and in about four months at $300,000 ^[5].