October 1st 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.

MAJOR RATE DROPS YESTERDAY AFTERNOON AND THIS MORNING: BEST RATES IN 4 MONTHS
Major stock selloff as the fourth quarter begins has triggered a continuing drop in mortgage interest rates. Labor reports show continuing unemployment, and weaker manufacturing figures than expected sparked worries that the economy is not recovering as fast as analysts have hoped.

The U.S. Department of Labor's weekly jobless claims data this morning shows that jobless claims increased more than expected to 551,000, indicating that companies continue to lay off workers even while the US economy appears to be improving.???? Continuing claims?? fell last week by 70,000 to 6.09 million, better than expected.?? Tomorrow's Employment Situation report is expected to show a substantial improvement, with job losses slowing but the unemployment rate moving higher to 9.8%.

Today the U.S. Department of Commerce released the monthly Personal Income and Outlays report. This data shows how much money people make and spend.???? Personal income rose last month more than expected by 0.2% , and spending surged 1.3%, showing that people are spending money and heating up the economy a bit.?? This information would normally be bad for mortgage-backed securities (MBS). However, it's not the whole picture: The?? Personal Consumption Expenditure report came in a tenth of a percent lower than expectations and shows that inflation is of little concern yet.

Also out is the?? Institute for Supply Management (ISM) index,?? indicating that the manufacturing sector of our economy continues to grow but at a slower rate than expected.

Finally,?? the U.S. Department of Commerce released its construction spending data.?? The report indicates that spending on construction increased much more than expected, which bodes well for a housing recovery.

With tomorrow's important Employment Situation report on the horizon, floating today would be pretty risky--keeping in mind the fact that rates tend to increase much faster than they drop and lenders' typical caution when pricing going in to weekends. If closing in the next 7 days I would LOCK my rate now. Otherwise, I would FLOAT it. 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.