The Daily Mortgage Interest Rate Lock Advisory - January 9, 2009

News for Today:

The bond market opened down slightly while Meanwhile Mortgage Backed Securities (MBSs) opened up slightly this morning and has not changed much despite the news of a spike in the unemployment rate last month. The stock markets opened down and are reacting negatively to the news.

• The Dow opened down 16 points from yesterday's close and is currently down 78 points
• NASDAQ opened down 8 points from yesterday's close and is currently down 28 points.
• FNMA 30 Year Mortgage Backed Securities opened up 1/32 from yesterday's close and is currently unchanged from yesterday's close.

Remember, on MBS, as the price goes up, the yield goes down - and mortgage interest rates go down with it. Conversely, as the price goes down, the yield goes up - and so do mortgage interest rates. Yesterday was a pretty uneventful day for mortgage backed securities as we closed at about the same level as we opened.  So far this morning, we are holding fairly steady but down slightly from yesterday's level as well. However, given the volume of mortgage application lenders are getting, I expect that mortgage rates will worsen by 0.125% today.

Economic Reports for Today:

• December's Employment Figures - December's non-farm payrolls showed a loss of 524,000 jobs last month; economists where expecting a loss of 500,000 jobs. In addition, November's payrolls were adjusted lower by an additional 50,000 jobs while October's payrolls were revised lower by an additional 100,000 jobs. In 2008, our economy lost 2.6 million jobs. The unemployment rate also moved higher than expected to 7.2%. Analysts were expecting to see a 7.0% rate. In addition, unprecedented losses in the 4^th quarter of 2008 helped make it the worst year for employment since 1945. There are now 11.1 million people out looking for work - the most since 1983.
  
  The jobs numbers will keep wage based inflation in check which is a huge positive for MBSs. 

Next week brings us the release of several important reports including December's Retail Sales data as well as two key inflation readings. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch on Monday.

Rate Volatility Index for Today:

Continued Volatility. Overall, I am expecting to see some movement in the markets, and there's some upward pressure on mortgage rates today.

The Feds have begun purchasing MBSs since Monday. You will see mortgage rates drop to historic lows, and lenders will be swamped with mortgage applications. I encourage you to apply for a mortgage somewhere - anywhere - now, and get the process started. You don't have to lock in a rate today - you can always float and lock in later. If you do, you'll be in a better position to lock in when the rates do drop again and not miss another opportunity for a great low rate.

If you can lock today at a rate that is at or below 5.0%, that would be very hard to pass up. Can rates go lower? Sure. But they could go higher, too. That's the risk you take when you play the lock/float game. So, please maintain contact with your mortgage professional if you have not locked an interest rate yet.

My Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Float if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 20 days
• Float if my closing was taking place between 21 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

As always, you can call me toll-free at (866) 684-1233 ext. 3913 to answer any questions you have about mortgage programs and interest rates, and to discuss your best loan options.