July 29th 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 opening ugly yesterday morning, mortgage backed securities (MBS) bounced back and some lenders did reprice for the better by day's end. The stock market is still the leading indicator for future interest rate fluctuations as lower stocks get investors running for cover to safer assets like benchmark Treasuries. This is good for MBS prices--higher prices mean that lenders can offer lower mortgage rates.

And the stock market is in a crummy mood today--investors booed and quickly sold their Yahoo stock after the company announced a new partnership with Microsoft. In addition, durable goods orders, which indicate manufacturing activity levels, dropped 2.5% in June, which was much worse than expected by analysts--they were only expected to slip .6%.

More corporate reporting didn't help matters--Time Warner and Sprint Nextel both disappointed investors. Oil prices are down as well. All deflationary indicators. Rates could move either way this afternoon, however, when the Federal Reserve releases its report in about three hours. It reports economic conditions and influences by regions in the the U.S. Since Chairman Ben Bernanke already testified to Congress last week, stating that the recession will take some time to cure itself, it seems unlikely that there will be any surprises in this report. I would say that the possibility for major changes is rather remote. Today's 5-year Treasury Note auction results are far more likely to influence mortgage rates--lack of interest in these instruments would push prices down and yields up--bad for mortgage rates. So:

I would LOCK my mortgage rate if closing within 30 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.