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The Daily Mortgage Interest Rate Lock Advisory - August 20, 2008

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 all/any 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.

Posted by Lewis Corcoran on 08/20/2008 04:54 PM

Comments (2)

Interest Rates in the Mortgage / Finance Channel

mortgage interest rates, mortgage market watch, mortgage interest rate lock advisory

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Post is included in group: Consumer Mortgage Tips
Post is included in group: Interest Rates
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2 Comments on The Daily Mortgage Interest Rate Lock Advisory - August 20, 2008

AUG

seems like rates are headed downward. has the market factored in rate cuts by the fed?

Mortgage interest rates are not directly influenced by or tied to the federal discount rate. The discount rate is the interest rate on secured overnight borrowing by depository institutions. Thus, any change in the short-term discount rate most likely will not affect interest rates on long-term mortgages.

Rate Relationships 2005 - 2008. Source: HSH.com

The primary conventional mortgage rate is a market-determined interest rate for long-term residential mortgage loans. 30 year mortgage rates are largely affected by supply and demand of funds available for long term loans and the anticipated inflation rate. When inflation heats up, bond traders demand higher long term rates. This drives the price of bonds down which in turn drives long term mortgage interest rates up.

One reason mortgage rates have dropped a bit this week is the comments made by Richmond Federal Reserve President Jeffrey Lacker on August 19th. "U.S. inflation will likely cool in the near future, despite recent data suggesting prices rose at a blistering pace in July," Richmond Federal Reserve President Jeffrey Lacker said on Tuesday. "I expected overall inflation will moderate in the coming months."

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