August 27th Best Mortgage Interest Rates and Lock Recommendation

By: Liz Freeman
August 27th, 2009  

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.

If you’ve been watching mortgage rates to get your jollies then you have had a boring week so far. Give up a bit today, take it back tomorrow. And the movements either way have not been large enough to write home about or affect anyone’s mortgage rate much. Yesterday’s Treasury Department’s 5 year note auction was deemed a success, with above-average demand allowing lenders to continue to offer attractive mortgage interest rates.

Today, the Commerce Department stated that GDP was expected to come in with a 1.00% decline for the second quarter of 2009. Not unexpected that our economy shrank by 1.0%. Since this report is backward-looking and was close to expectations, it doesn’t affect mortgage-backed securities (MBS) and interest rates.

Weekly jobless claims were also reported by the Labor Dept. As part of this report we get both new claims for unemployment as well as continuing claims data–which indicates how many American are still receiving benefits because they can’t secure a new job. Today’s figure was 570,000 new claims, 10,000 less than last week’s revised 580,000. The continuing claims dropped 19,000 to 6.13 million from 6.24 million last week. Unfortunately this is mostly from people losing their benefits due to expiration rather than dropping off the roles because they found work–bad for the economy, possibly good for mortgage rates.

I am going to be boring like the mortgage market and stay with my claim that locking is the best strategy right now. Today’s mortgage interest rates are still amazingly low and lenders are getting busy again, especially trying to accommodate the first-time homebuyers who finally got off the fence and decided to buy a house at the 11th hour. So there isn’t much incentive for lenders to dump rates–they have plenty of business. Markets are fear-driven and lenders don’t hesitate to crank rates up in a heartbeat if the market gets funky. But they take a little longer to lower them if things look good (that is, non-inflationary). And if you have been following mortgage interest rates you know that every time rates have made it down this far, they just pop back up again in a day or two. Therefore:

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