August 31 Best Mortgage Interest 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.

No major economic reporting this morning, although the rest of the week will be busy. Today's interest rates got a tiny bounce from weakness in the stock markets. One minor report, the Chicago Purchasing Managers Index,�� came in more favorable than expected (generally not good for bonds) but is considered too unimportant to affect mortgage-backed securities (MBS) prices.

On Tuesday, ISM Manufacturing data and construction spending should provide more economic input. On Wednesday the Factory Orders data and ADP Employment data come in. ADP measures the number of jobs lost or created each month by private (non-government) employers. This includes Productivity and Costs from the U.S. Department of Labor, which shows how efficient we are--the goods and the labor costs of producing. In addition, the Federal Open Market Committee will release the minutes from its last meeting. These minutes , when released, are scrutinized carefully by market-watchers hoping to divine the Fed's intent over the next few weeks. It always has the potential to change the markets. Thursday brings weekly jobless claims and ISM non-manufacturing index, but these reports are considered minor in comparison to the the Employment Situation data coming on Friday. Also considered heavy-duty news will be the U.S. Department of Treasury announcement of the size of next week's Treasury auctions. It plans to auction off 30 year bonds, 10 year notes, and 3 year notes. Reaction to these offerings continues to be favorable despite the amount of debt the US is carrying, which so far has helped keep mortgage rates at very attractive levels. Friday brings employment data which is always considered extremely important. Experts expect fewer job losses but the unemployment rate remains high. If the data come in substantially better (which is inflationary) or worse (deflationary) than expected, rates could move rather dramatically.

With rates still nicely down and a lot of potential for movement in the market this week, I'd lay low unless I were refinancing and needed a specific target rate for it to work out financially. Therefore:

I would LOCK my mortgage rate if closing within 30 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.