Mortgage Rate Forecast: June 2008

My Lock Advice for Today:

We've had more days where rates went up and not down in the past couple of months. There is always the possibility of improvements, but floating is becoming very risky and is not recommended.

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Lock if my closing was taking place between 8 and 20 days
• Lock if my closing was taking place between 21 and 60 days
• Lock if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

My Lock Advice for Today:

We've had more days where rates went up and not down in the past couple of months. There is always the possibility of improvements, but floating is becoming very risky and is not recommended.

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Lock if my closing was taking place between 8 and 20 days
• Lock if my closing was taking place between 21 and 60 days
• Lock if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Mortgage Commentary

As expected, mortgage rates went up again last week.  Inflation and other economic concerns permeate the bond market and keep driving mortgage rates upward.  There does not seem to be any relief in sight any time soon.  If you haven't already done so, I recommend getting locked now before rates rise even more.

Rising concerns about inflation, and any eventual Fed response, served to push mortgage interest rates notably higher last week.  And, fears of inflation continue to grow with no resistance in sight, making bonds an unattractive investment and pushing rates up.  As a result, home loan rates will continue to move higher.  Inflation erodes the value of a bond or mortgage-backed security - which is what home loan rates are based on - so rates have to move higher to compensate for the loss in value of the fixed return a bond provides.

Lenders who are interested in making new, better quality loans to put on their books may decide to start to absorb some of those underlying increases in order to help keep at least some production flowing.  Of course, Fannie Mae and Freddie Mac could also purchase more loans at lower rates for their own books, much as they are starting to do for the new expanded conforming loans.  Keeping the housing market even breathing may depend on such action if rates continue to press higher.

This week brings us some housing data, industrial production, and the Producer Price Index, among other indicators. The drive for higher yields and rates continued though all of last week, but the sharp increase in rates may be done for the moment.  I think rates should level off next week at these less-comfortable levels.

If you're considering financing within the next 60 days, conditions favor locking sooner rather than later. Although there will be occasional news-related dips, those who play it safe and lock their rates will fare better than the gamblers who float.  Don't lose a good rate today by hoping for a better one tomorrow.  Risk outweighs reward.

• If you have an adjustable rate or need to get cash out of your home, don't wait for rates to go up even more.
• If you have found the right home to buy, secure your financing today.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Search today's mortgage rates anonymously. And, as always, you can call me at (508) 471-4144 with any questions about mortgage rates and to discuss your best loan options.

My Lock Advice for Today:

We've had more days where rates went up and not down in the past couple of months. There is always the possibility of improvements, but floating is becoming very risky and is not recommended.

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Lock if my closing was taking place between 8 and 20 days
• Lock if my closing was taking place between 21 and 60 days
• Lock if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Current Rates*: 

• 30 Year Fixed - 6.50% with 0 Points
• Jumbo 30 Year Fixed - 8.0% with .5 Points
• 15 Year Fixed - 6.125% with 0 Points
• FHA /VA 30 Year Fixed - 6.375% with 0 Points
  
  *Rates and fees accurate as of 6/13/08. Rates and fees subject to change without notice.  This is not an advertisement for the purposes of the Truth-in-Lending Act or Regulation-Z. Terms and conditions apply. For qualified borrowers. Not a promise to lend.

My Lock Advice:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Lock if my closing was taking place between 8 and 20 days
• Lock if my closing was taking place between 21 and 60 days
• Lock if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Looking Back

Interest rates ended up at an 8 month high on news of inflation and the Fed Beige Books report on "weak economic conditions."

In other news, Pending Home Sales were up in April for the first month since last October. While still down 13% from the previous year, NAR economists are predicting modest gains in the number of pending contracts over the next few months, then solid gains for the rest of the year and beyond.  Analysts are crediting sharply lower home prices for the positive news.

Looking Forward

The most important financial releases this week have to do with inflation data. Tuesday's PPI (Producer Price Index) and New Housing starts will be the most interesting.

If this Summer goes the way of recent Summers, rates will remain high until after Labor Day.

How Are Tightened Lending Practices Hurting the Real Estate Market?

Tighter lending guidelines are part of the reason for the dramatic downturn in the real estate market, especially for people with lower credit scores or hard to prove income.  The pendulum has swung hard in the opposite direction from the days when lenders were approving everybody and their dogs for just about anything.

This is the inevitable result of the collapse of the sub-prime mortgage collapse a year ago.  The current mortgage climate favors borrowers with good credit histories and traditional income sources, and this is likely remain this way for at least the rest of 2008.

The problem can be traced back to Wall Street.  When housing prices were skyrocketing, investors paid little attention to who was borrowing the money.  The feeling was that if the borrower failed on their loan, the foreclosed home would sell quickly for a higher price, and the investor would be paid off.  However, in a declining market, investors are afraid for being left on the hook for a vacant property and an unserviceable bank note.

Would you like a free gift of money to be used for the down payment and/or closing costs on the purchase of your first home? If so, I have great news for you! In most states, free money is available for first time home buyers who need help with the down payment and/or closing costs. And, in many states, the grant amounts are in the multiple thousands of dollars. This money typically comes in the form of state, county, and/or local government grants. This is free money that shouldn't be passed up!

Many states also offer below market interest rates to first time home buyers. In addition, many of these states offer 2nd mortgages that are designed to help with downpayment assistance and/or closing costs. In some cases, the interest rate on the 2nd mortgage is zero.

In most states, you are considered a first time home buyer if you have not owned a home in the previous three years. In addition, many states consider people who are recently divorced to also be first time home buyers - even if you just should sold or were bought out of your marital home.

To find out what first time home buyer grants and assistance programs may be available in your state, please contact me. Also be sure to ask for my free report "How to Buy a Home with Zero Cash!"

My Lock Advice for Today:

We've had more days where rates went up and not down in the past couple of months. There is always the possibility of improvements, but floating is becoming very risky and is not recommended.

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Lock if my closing was taking place between 8 and 20 days
• Lock if my closing was taking place between 21 and 60 days
• Lock if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

My Lock Advice for Today:

We've had more days where rates went up and not down in the past couple of months. There is always the possibility of improvements, but floating is becoming very risky and is not recommended.

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Lock if my closing was taking place between 8 and 20 days
• Lock if my closing was taking place between 21 and 60 days
• Lock if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Mortgage Commentary

As expected, mortgage rates increased slightly again last week. Rates continue to be pulled up by rising inflation concerns. Most experts see this hike in rates to continue through the summer. However, rates are still historically low. If you have not already done so, I recommend locking in now before rates rise beyond reasonable terms.

Upward pressure for mortgage rates persisted last week. With the exception of the occasional dip in rates that occurs from time to time as a knee jerk response to market news, I can't see any reason why rates wouldn't move higher long term. Rates have been mostly rising in recent weeks; however, there are limits to how far they can rise (or fall, for that matter) in the current economy.

Any downside pressure on home mortgage rates caused by last Friday's rally in Treasuries won't be felt until this week, but with the influence of other economic factors, the pressure on mortgage rates has more potential on the upside than the downside, at least at this moment.

Overall, expect mortgage rates to continue moving higher as inflation concerns continue to rattle bond markets. Inflation devalues your dollar and rates move higher to compensate for that. Expect day-to-day volatility to be the norm.

Don't lose a good rate today by hoping for a better one tomorrow. Risk outweighs reward.

• If you have an adjustable rate or need to get cash out of your home, don't wait for rates to go up even more.
• If you have found the right home to buy, secure your financing today.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Search today's mortgage rates anonymously. And, as always, you can call me at (508) 471-4144 with any questions about mortgage rates and to discuss your best loan options.