Our Mortgage Rates Report from last week advised clients to float their loans.  We still maintained a lock-in stance for all non-conforming and jumbo loans as that market is changing daily.  Until Wall Street investors set the market for jumbo loans, we maintain that stance.

The advice was fruitful to those that heeded it.  Rates decreased an average of .125% this past week.  Now, we think it's time to reap that reward and lock-in interest rates for all loans at application.  Mortgage bonds are trading near their 200-day moving average which means that the next 2-3 days may show the absolute best rates in 6 months on the fixed-rate mortgage side.  We think there is more risk to rates rising before the Fed meeting in September than there is opportunity for lower rates during that period.

One of our portfolio lenders is offering an annual ARM, interest only,  at 5.5% with an APR of 6.44%.  This means that the first year is locked in at 5.5%, the second year at 6.44%, and then the loan becomes a LIBOR-based ARM.  There is no pre-payment penalty associated with this loan.  We particularly like this loan product because we believe that interest rates are in a 12-24 month downward trend; we think there will be some opportunities to refinance to a fixed rate loan as low as 5.5% in the next two years.  Borrowers with a short-term horizon (meaning they may consider a move in 12-24 months) should ask for more information.  Admittedly, this is a teaser rate but sometimes teaser rates have the right application when the hold timeframe matches up to the interest rate term.