Mortgage rates are improving. Economic weakness and an anticipated Fed cut drove 30 year fixed mortgage rates to their lowest level, in 25 months, in mid December. While mortgage rates are not as low as mid-December, they are
getting lower. Two things are contributing to this near-term phenomenon:
1- Economic weakness suggests a recession is underway.
2- Continued anarchy in Pakistan is scaring the world- money is flowing to safe havens like mortgage bonds
Should you float or lock your mortgage rate? We've been recommending to float the mortgage rate at application, for a week, and we're not going to change now. Let It Ride; we're "playing with the house's money".
Change could come quickly as the threat of inflation looms. Oil hit $100/barrel, for the first time, today. The concern is old-fashioned, 1970's style, stagflation; a shrinking economy with rising commodity prices. We started talking about stagflation back in October so this shouldn't surprise you regular readers.
So, where are mortgage rates going in 2008? Playing the interest rate game is going to be as predictable as a Vegas Craps table. So, our bias, throughout the year will be to locking, unless we have these little opportunities. So, Let It Ride, Baby...Let It Ride. The whole thing could reverse tomorrow so be prepared to act quickly. Keep checking back.
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