Mortgage Rate confusion!!   

Here's the question...how low will rates eventually go?  This is an interesting question to say the least, in the current times.  We are currently experiencing a refinance boom in this country.  That's the good news.  The bad news: It is expected that at least 50% of all those interest rate locks will fall through.  In other words, thousands of homeowners have locked in their rates in hopes to refinance to a better position with their mortgage.  50% of these will not close...due to denials, low home values and a whole slew of other reasons.  How does this affect us?  Let me explain:

 When a consumer decides to lock in their rate, the lender is committing those funds on the secondary market.  When these locks expire or don't get fulfilled, the investor charges the lender a fee.  With 50% of the rate locks expected to fall through, this equates to big losses for lenders.  What can happen?  There is speculation that lenders may start charging a FEE to lock in an interest rate to protect themselves from the losses.  To the consumer, this may mean an upfront fee to lock or a fee that is incorporated into the rate.  So, even though rates may go very low, if lenders decide to charge this fee, the consumer gets to decide to pay the fee or take a higher rate to "bury" the fee.

Unbelievable!  It will be interesting in the coming weeks and months to see how lenders respond to the losses of thousands of unfulfilled rate locks.  No matter what, the consumer gets to pay. :(