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Hi Julie,

It seems that with many lenders, paying 1 point will decrease your note rate by .25%. Is this more or less a standard, or does the amount of note rate decrease depend on the lender?

Yes, "it depends." It's not so much an issue of the lenders than of the differences in supply and demand between the different rates, and the costs and levels of hedged risks of the lenders.

For example, on the 30 year fixed products, there will be times when a lender has built their hedge position in the bond markets to most significantly cover their risk on loans in the 7% range.

Because they are underprotected for the most immediately lower rates, it may cost as much as 1.5 points to get the 1/4% rate drop, while a 1/4% rate RISE will only net you 3/4 points in rebate (or less!)

The reverse can occur as well, of course... the lender being over-protected at a certain level, thus making it a "sale" in comparison to the competitor lenders' rates.

All this is invisible to the general rate-shopping public, of course, and occuring much too fluidly to be reflected in the publically quoted rates.

Hope this is insightful,
Dave Donhoff
Lic. Mortgage Broker
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