America's mortgage rates are behaving exactly as I expected they would when I reissued my lock recommendation on May 29, 2008. What then for June, 2008 mortgage rates?
Expect more volatility. The Fed's in a weird spot. The economy is tanking under the pressure of high gas prices and the real estate recession. The tax rebates are mailed and that money's been spent. Gasoline is at $4.00/gallon. Food costs are spiraling from the dumb ethanol energy policy. Ben Bernanke doesn't know if he should be fighting inflation on Monday or preventing a depression on Tuesday. His mixed signals are being perceived as a potential rate hike which has kept America's mortgage rates above 6% these past two weeks.
A thirty-year fixed rate loan is at 6.375% now. The 5/1 ARM I loved so much at 5.375% has risen to 5.5%. I'm not certain that we'll see those rates come down this month. If you have a June or early July closing, lock your mortgage rate now. I do, however see the weak economy outweighing the inflationary fear. The Saudis are attempting to increase production which leads me to believe that they think the bull market in oil is over. If you have a closing in July, or are considering a refinance, I think you can float your rate until mortgage rates drop below 6%.
If you're thinking of refinancing, it makes complete sense to start the process now by applying for a home loan. I expect credit guidelines to tighten throughout the summer. While I think you can hold off on your mortgage rate lock, you should get the documentation in so that the loan can be underwritten in June. Loan approvals are usually good for 60 days so you can lock and close when rates come back down.
In summary: Lock all loans closing within 30 days, float the rest.
PS: This could change daily. Market volatility is such that I could move to an "all float" recommendation if the reaction to the Saudis summit is positive. If oil gets down below $120/barrel, The Fed won't worry so much about inflation. As always, keep checking back or subscribe to my RSS feed.
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7 Comments on America's #1 Mortgage Rates Report: June 9, 2008
it seems the fed dropped the bank rate and mortgages barely budged. what gives?
Brian, that is sound advice there.....we seems to be in for a rough couple of weeks in the markets
Brian.... the market is volatile? Nah.... it was great Friday and crap today, so makes you say that...... lol This does sound like good advice, but yes, it could change in a heart beat. The MBS's are extemely volatile and were not good today, even though the bonds were so so...
what's the prognosis for 3rdQ2008?
what's the prognosis for 3rdQ2008
Higher mortgage rates in anticipation of Fed hikes
Good Advice. I have learned not to question the wisdom of America's #1 Mortgage Broker...lol, but seriously this is sound advice. Personally I think that either a FED rate hike or a decrease in the cost of oil per barrel will ultimately stabilize mortgage interest rates. I even think that if the FED hikes its FED Funds rate that we will see a stronger dollar and more investments in MBS and Bonds which could help to lower mortgage interest rates slightly.
I even think that if the FED hikes its FED Funds rate that we will see a stronger dollar and more investments in MBS and Bonds which could help to lower mortgage interest rates slightly.
That's just the kind of counterintuitive thinking that works in this market, Chris. That statement SHOULD be false but it's not. Why? Markets are discounting mechanisms which means that the MBS markets are already pricing in a a Fed hike. When it happens, it will be seen as positive news and attract more foreign capital.
Kudos, Chris! We're learning that red means green in this crazy market and you are not color blind!
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