July 24th Best Mortgage Rates and Lock Recommendation

Here is today's look at best mortgage rates, (which do not include discount points, origination points, or loan level risk based price adjustments) 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.

After a strong showing earlier this week, , mortgage backed securities (MBS) prices dropped like rocks yesterday. And lenders who had opened with nice low rates were forced to reprice for the worse often several times throughout the day as it became clear the trend wasn't going to reverse itself. So mortgage rates moved higher--to a par 30-year fixed rate of 5.25% up from 4.875% the day before. And the market is not bouncing back today so far; this morning MBS yields are increasing almost as much again as yesterday.

Even the stock market is unhappy today--disappointing results from Amazon and Amex sucked the growing optimism right out of the equities investors. Treasuries have remained almost frozen--perhaps later in the day the MBS will improve at least to the point that Treasuries have--that is, head back to where they finished yesterday. I'd wait until the day's end to see if ANYTHING moves the MBS market--normally it does kind of tailgate from the Treasuries. The only data released today was the University of Michigan's Consumer Sentiment survey, and while the numbers were slightly higher than expected it wasn't enough to elicit more than a yawn from investors. So I wouldn't expect any major moves, particularly as this is a Friday and lenders really don't like to make big changes (even in a nice direction) before a weekend, over which anything can happen.

Next week will bring a few economic reports but nothing considered terrible important. Once again, markets are likely to be driven by emotion--fear, wishful thinking, etc. Bonds are likely to be pushed around by whatever happens in equities and the results have proven extremely volatile and unpredictable. One consideration for those still shopping, however, is that the $8,000 credit is likely to expire this year--thus fueling last-minutes runs at the housing market, pushing demand for homes and mortgages up. And when that happens, rates and home prices could likely increase. So if you're on the fence, get off already.

I would LOCK my mortgage rate if closing within 45 days; otherwise I would FLOAT my 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.