Where Mortgage Rates Are Headed
A: Every homeowner and buyer knows the importance of where lending rates are headed because it directly affects the monthly payments that they will be responsible for. As rates rise, so do your monthly payments making a property a bit less affordable depending on your income. Here are some thoughts on lending rates as reported by the blogosphere.
LENDING RATES ARE CORRELATED WITH THE FED FUNDS RATE WHICH NOW STANDS AT 5.25% AND CONTROLLED BY THE FOMC AND FED CHIEF BEN BERNANKE. THE FED FUNDS RATE IS RAISED IN TIMES OF ECONOMIC BOOM AND INFLATION WORRIES TO SLOW DOWN THE ECONOMY. THE FED FUNDS RATES IS LOWERED IN TIMES OF ECONOMIC SLOWDOWN AND DISTRESS TO STIMULATE CAPITAL & CONSUMER SPENDING TO HELP SPUR ECONOMIC GROWTH. RIGHT NOW WE ARE IN THE FORMER ENVIRONMENT.
Mortgage Reports: A great blog focused on mortgage rates and the like by Dan Green. He reports:
I am predicting that rates will remain unchanged over the next 30 days, but that doesn't mean you should necessarily follow my advice when choosing whether to lock a rate, or float it. My advice may not be appropriate for your individual situation.
If you are shopping for mortgages and the idea of not having a rate lock commitment makes you nervous -- regardless of my predictions -- I recommend that you go ahead and lock in your rate. There is just too much financial risk in floating a mortgage interest rate -- especially given the volatile nature of the markets.
Mortgage Matters: Holden Lewis's blog on bankrate.com tells it like it is and how surveys of top lenders turn out. He reports:
In this week's Bankrate.com survey, the average rate on a 30-year fixed fell 12 basis points. Actually, though, rates have been at a standstill -- all or most of that drop occurred a week earlier, during and immediately after Bankrate's July 19 mortgage rate survey. Because of timing, we didn't catch that decline, so it spilled over into this week's survey.Hot Property: Hot Property is BusinessWeek's real estate blog and has some good stuff. Here is a very interesting response to a reader's complaint about the big swings in lending rates offered by E-Loan. It doesnt cover the direction of mortgage rates, but is interesting enough to bring to your attention.
Yeah, it's confusing.
I need to lock in a rate in the next week for a house in Silver Spring and have been shocked by how much the rates change from one day to the next.The Response:
Specifically, what the Loan Consultant was referring to was the fact that the 10-year treasury benchmark had dropped in the previous couple of days to its lowest in 4 months. However, your writer is comparing this to the Freddie Mac rate which is a backward logging rate - always looking back about a week or so whereas most lenders tend to move with the market. In other words, the writer was not comparing apples to apples. Unfortunately, it seems that consumers are often misled - or tend to misunderstand - the relationship to mortgage rates of these Freddie Mac announcements.Finally, here is a chart from FreddieMac.com showing the change in lending rates over the past 7 weeks:
It's usually best to lock in a rate in the morning since most lenders tend to increase their margins at the end of the day and put out their best price in the morning to encourage applications and locks.