So, it has been almost a month since my last post on “the Mortgage Blog.” If you have been in mortgage-advice-limbo because of my lack of posting, here is what you missed.
The market (mortgage-backed-securities market) is getting worse, mortgage rates are going up. The market is getting worse, mortgage rates are going up. The market is getting worse, mortgage rates are going up. The market is getting worse, mortgage rates are going up, repeat, repeat, repeat, etc., etc., etc. That trend continued for the majority of the last two to three weeks. So, why the rise in mortgage rates? Didn’t you hear something on the news about rates going DOWN?!??
Yes, you did. And yes, the Federal Funding rate went down (see previous post), and will likely go down again in the near future; but this almost always has the opposite affect on mortgage rates. So, the ever-popular million-dollar question, “Do you think mortgage rates will go down?” My answer, “Yes. I think mortgage rates will go down . . . especially now that they have gone up 1% over the past few weeks.”
Mortgage rates hit their low at around 5.125% for a 30 year fixed rate loan — only to stay there for about four hours. By the end of the day (before most people had a made a decision to lock-in, had done some comparison shopping, etc.), mortgage rates had gone up by more than 0.5% . . . and then over the next couple of weeks, proceeded to go up another 0.5% or more. So, now with some perspective, looking at 6.25% on a 30 year fixed rate loan — the idea of locking in a rate at even 5.25% (which was available for a day or two), sounds like a pretty fantastic deal.
Lesson: Know that 5.25% is a great rate on a 30 year debt (I could write a whole bunch here on the idea of a 30 year, tax deductible debt payment at 5.25% trying to compete with an estimated inflation rate of 2.0% to 2.5% at best, but I will save you the economics lecture). Know that 5.5% is a great rate on a 30 year mortgage — and more importantly know when the numbers make sense for you to lock-in on your refinance. If the numbers make sense at 5.75%, then the numbers make sense, right?? If rates hit your target, lock-in. Save some money. Hug your mortgage broker.
So, why the post after 30 days of silence? Good news could be coming . . . just waiting on the (hopeful) big rebound.
Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.” Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing. For more information about available programs and interest rates, please visit www.hillsidelending.com.