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Should I float? Should I lock?

This question has been asked of many a Realtor. Heck, my wife and I asked our Realtor on the very first house we bought so many years ago. Since then I have learned and have been teaching the correct answer to many a home buyer or refinancer.

It depends! Rates are always fluctuating. Today it goes up an 1/8, tomorrow down an 1/8. Then there are the really big jumps. Some really terrible economic news is released (ripped from today's headlines) - "The Labor Department repoerted a loss of 4,000 jobs in August." Rates have improved by up to a 1/4 point. (Why they improved is room for another blog post.)

Your mortgage professional partner should be able to guide you and your clients as to the best course of action. It isn't a gamble. Though no one does possess a crystal ball, there are many methods in determinng how rates are going to be acting in a particular day and over the short term. As a Realtor you should also be aware of the market situation so you are not taken by suprise.

Good Economic news = Worsening Interest Rates. Bad Economic News = Improving Interest Rates. Stock Market Jumps = Worsening Interest Rates. Stock Market falls or corrects = Improving Interest Rates.

These are always good rules of thumb to live by. The best thing is to be getting regular updates from your mortgage professional so you appear to be the professional as well!

Posted by Matthew Rosov, Certified Mortgage Planning Specialist on 09/07/2007 11:33 AM

Comments (15)

Mortgage Rate Guidance in the Mortgage / Finance Channel

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15 Comments on Should I float? Should I lock?

SEP

2007

Good post. Thanks,

the market has built in a rate cut by the fed in september. todays employment numbers were lousy. If

the "fed speak" that comes out after sept shows they are willing to cut further then you will get a nice drop in rates..mike

SEP

2007

I love that question myself. People ask me "what do you think rates will be doing next week" I say "hold on, let me get my crystal ball out and after that I'm retiring because I'm going to use it to hit the powerball" they get a kick out of it. I just let them know if there are any major reports coming out that I know of and if there are then it can go either way depending on the news... Realtors should definitely stay updated though so they are on the in. My fiancee does a fantastic job of keeping up dated as an agent. Yes I help her out but she does a lot on her own with guidelines and such. Even as simple as knowing the conforming loan limits.

Its all about weighing risk vs reward. No one can predict this - I had a client lock in Monday because rates were slightly worse than when we ratified - then they went down Friday. You never know.

Thanks for all the comments. It's true - You never do know. Even the "experts" who make the big bucks advising others are wrong on occasion.

FEB

2008

I'm just a homeowner trying to decide when to lock in my re-fi rate. I don't know why I'm having trouble grasping your terminology. When you say "worsening interest rates" you mean climbing interest rates? Right? And "improving interest rates" refers to decreasing interest rates?

Worse=Higher?

Michelle - You are correct. Worsening rates means they are going up, where as improving rates indicates going down.

MAR

2008

Take the advise of your mortgage specialist.

Patricia Aulson/ Lic NH ME MA Hampton NH Real Estate Portsmouth NH Real Estate

SEP

Oh, does my mortgage have a crystal ball?

OCT

I have a 5 year balloon that expires in May, 2008. I need to refinance but I don't know if I should wait or not. My balloon rate is only 4%, should I wait?

OCT

MGD - To give you good advice I need to know the following questions...

did the loan balloon in May, 2008 or will it in May, 2009?

How often would the loan adjust?

To what index is the loan tied?

What is the Margin on the loan?

Each of these questions can be found in the original Note or Deed you signed and should have a copy of.

Let me know and I will be happy to help.

Matthew

NOV

Matthew,

I used to see a direct correlation with the news of the economy and mortgage rates, but now it's a bit murky. You also used to be able to look at the yield on the 10-year bond and find out which way the rates were trending, but once again...murky. Hopefully, rates settle down a bit.

NOV

"Good Economic news = Worsening Interest Rates. Good Economic News = Improving Interest Rates."

This reads "good economic news" results in both worsening and improving interest rates.

This quote from your original post is a typo, or hints at the crystal ball nature of figuring out interest rate movement ?

Wolf - Thank-you. You are the first to see that.

NOV

I'm glad my economics degree finally paid off ! Thanks for your thought provoking post.

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