December 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.

Mortgage-backed securities (MBS) prices still high, keeping mortgage rates low.?? RECOMMEND LOCKING. Keep?? in mind that mortgage rates move inversely to mortgage bond pricing. Unfortunately, despite the move higher in MBS prices, rates remain range-bound, and lenders have been reluctant to drop mortgage rates much below 4.50% (par rate for well- qualified borrowers).

Today's reports from the Institute for Supply Management, which measures the strength of our manufacturing sector, showed the economy recovering more slowly than expected.?? Readings above 50 indicate growth, while those below 50 indicate weakness.?? Last month's index was the highest ISM number since the summer of 2006 at 55.7.?? Analysts expected this month's report to come in at 55.0, but it came in at 53.6. This is disappointing for the economy but good for bonds and MBS.

Construction Spending data is next. An increase would indicate economic recovery and thus be bad for MBS. People have to be confident regarding the economy before they invest in construction projects.???? And increased construction spending could lead to more construction jobs which puts more money into the economy. However, that didn't happen. The U.S. Department of Commerce reported that construction spending in October was $910.8 billion, nearly unchanged from the?? September read of $910.4 billion.

Finally, the National Association of Realtors reported its Pending Home Sales Index. An increasing trend in pending home sales would be a signal of positive economic growth, a negative for mortgage interest rates. The prior two months posted increases attributed to the government first-time buyer tax credit, and this trend continued in October--pending home sales were up 3.7%. Pending home sales are up by 31.8% from last year's record low levels.

There is very little benefit to floating an interest rate at this time, and rather a lot of risk involved.?? If closing in the next 60?? days I would LOCK my rate. 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.