December 31st Best Mortgage Interest Rates and Lock Recommendation

By: Liz Freeman
December 31st, 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.

*** LOCK ALERT *** RATES MOVE HIGHER ON UNEMPLOYMENT DATA***

Today’s mortgage-backed securities (MBS) market is ending the year with a negative day. Stocks are also off with the Dow down 42 points and the Nasdaq down 6 points. Bond and MBS prices should push this morning’s mortgage rates higher by approximately .250 of a discount point.

Last week,  438,000 new claims for unemployment benefits were filed,  well short of the 460,000 that was expected–and anything that is more positive for the economy than expected is bad for mortgage rates.  Bonds are reacting negatively to the news and with thin trading because of the holiday, the reaction has been stronger than it normally would be.

Yesterday’s auction of 7-year notes went fairly well–better than expected, which helps blunt the response to unemployment data somewhat.

If closing in the next 60 days, 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.