December 10th Best Mortgage Interest Rates and Lock Recommendation

By: Liz Freeman
December 10th, 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 INCREASE IN WAKE OF TREASURY AUCTION  *** Demand for bonds and Mortgage-backed securities (MBS)  and bonds soft. Stock rallies driving mortgage rates up.

Thursday’s bond market is down after yesterday’s weak Treasury auction. The stock markets are  up; bonds and mortgage-backed securities (MBS) are off significantly, which will probably push today’s mortgage rates higher, costing an additional 1/4 of a discount point.

Today’s economic news:  The Labor Department announced that 474,000 new claims for unemployment benefits were filed last week. This was more than  expected, which is good for MBS and offset a little of the losses resulting from yesterday’s poor showing of 10-year Treasuries at auction. Investor appetite for longer-term U.S. debt was not hearty.  We can probably expect to see mortgage rates rise in the near future. Today, there will be a 30-year Bond sale, which is not as important as yesterday’s sale was, but may tell us if the softening demand is a real trend or just an aberration. That could lead to afternoon improvements, but I doubt this will happen–if demand continues to be soft, we are likely to see price increases this afternoon.

November’s Retail Sales report will be released  tomorrow morning , and so will  December’s preliminary reading of the University of Michigan’s Index of Consumer Sentiment. These are both considered important pieces of data and could drive rates strongly if they don’t come in as expected.

If closing in the next 15 days, I would LOCK ; 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.