Home buyers should lock-in their interest rates. The mortgage-backed securities market is responding to two events and mortgage bonds are dropping.
The Federal Reserve Bank did not raise the Discount Rate yesterday (as expected). Fed Chairman Ben Bernanke spent very little time discussing the mortgage liquidity crisis and talked about containing inflation more. We see this as positive because it shows that we have a Fed Chairman who is calm, amidst a crisis.
Why change our posture from floating to locking? China is threatening to dump it's $1.3 Trillion in bond holdings as a response to our threat of trade sanctions. It's a game of chicken being played by diplomats. Their sale would hurt our markets for about 3-4 months; our trade sanctions would close their largest market. Regardless of which way the political winds blow, we think our customers should be forward locking in rates as soon as they apply for a loan.
Overall, I was a gambling man from'94 to '01 and made decent money that way....but not at this moment.
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I tend to find that most of my clients are the floating type of clients... but right now you are right... things are jumping in big ways and since the market is not actiing in the way it should, we can't confidently assure that a .125 jump will be all we see which is usually easy to recover over a week.
right now, I think this whole stink about lead paint in Fisher Price toys and all the contamination is souring our relationship with China... they arrested some US distributor of food saying that we had sent THEM contaminated food...
the company president of the firm that had sent over contaminated dog food to the US was EXECUTED
so right now, I think they're re-posturing in the Chinese tradition... best thing to do is just get out of their way and let them think they've regained their face.