Best Rates and Lock Recommendation for June 12, 2009
By: Freeman Liz
June 12, 2009
| Program | Rate | |
| 30 Year FRM | 5.22% | Better by .02% |
| 15 Year FRM | 4.63% | Better by .02% |
| 5/1 Year ARM | 3.92% | Better by .04% |
| Jumbo 30 Year FRM | 5.39% | Better by .03% |
Here is today's look at best mortgage rates (which may require points), provided by Mortgage News Daily, Freddie Mac, and other sources. Note that Freddie Mac's AVERAGE rates are typically higher than BEST rates, because average rates include surcharges for risks associated with property types, down payments, and credit scores. To be eligible for BEST rates, borrowers need spotless credit (740 score or better), a sizable down payment (20-25%) or equity amount, and stable, adequate, and documentable income. In addition, the property must be located in a healthy (not declining) market and must be conventionally built.
Mortgage-backed securities (MBS) markets showed tiny improvements for the second day in a row, partially reversing the recent trend of big price drops (which translate into mortgage interest rate increases). So today's improvements are likely to proliferate through the mortgage industry in the form of lower interest rates for consumers--probably about .125% lower than recent offerings on 30 year fixed rate loans.
In addition, investors seem to be wavering between optimism about an economic recovery and pessimism about future inflation. Until the Fed's June 23rd meeting, which investors are already speculating about, expect to see a jittery tug-of-war between equities and bonds. Today, it's equities on the down side and bonds on the winning side--a positive near-term sign for mortgage rates.
So, do you float or lock? There has been, after all, a small but nice improvement in pricing during the last two days. The biggie is that investors are in general are more fear-driven than profit-driven--rates move higher much faster than they improve. So your own risk tolerance comes in. Decide what would hurt more-- locking and missing a lower rate, or floating and getting killed by a sudden rate jump? For example, if a large rate increase would blow your loan approval and make your loan unaffordable, I'd say play it safe. If you're refinancing and have a target rate in mond, you can probably afford to play a waiting game. But it is safe to say that rates will be extyremely volatile over the next few weeks / months. Therefore:
If I were closing a mortgage, I would LOCK my rate if closing within 15 days; otherwise I would FLOAT my mortgage rate. This is only an opinion--what I would do if I were closing a mortgage at this time. Your decision may depend on other factors such as the strength of your loan approval and your tolerance for risk, and must be made with those in mind.
Liz Freeman has more than a decade of mortgage lending experience. She writes about mortgage and finance issues and is a regular contributor to Mortgage News Daily.
