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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