Mortgage Rate Forecast: July 2008

My Lock Advice for Today:

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

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 20 days
• Float if my closing was taking place between 21 and 60 days
• Float 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:

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

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

News of rising rates was everywhere last week as inflation fears dominated the mortgage market. Equity markets have improved, and stocks have been trading higher amid inflationary reports. This is putting a lot of pressure on the mortgage backed securities which is leading to an increase in rates. This week is shaping up to be another volatile week as well, and several important economic reports are due to be released. Rising defaults are also increasing risk and decreasing investment in mortgages which is adding pressure to interest rates.

We seem to be in a situation of "no news is good news," at least as far as mortgage rates are concerned. These "quiet" periods, however - even weekends - have proven to be no friend of the markets lately. There's too much time to worry, perhaps, and with a calendar empty of fresh data until Thursday, there's almost five days of worrying available until the next cascade.

Overall, it's shaping up to be a fairly active week in the mortgage market. With several important economic reports on tap, we will likely see noticeable movement in mortgage rates more than one day.

The first piece of news will come late Tuesday morning when the Conference Board posts their Consumer Confidence Index (CCI) for July. This index measures consumer sentiment, giving us an idea of consumer willingness to spend. This is important because consumer spending makes up two-thirds of the U.S. economy. If the CCI reading is weaker than expected, we may see bond prices rise and mortgage rates drop Tuesday. Current forecasts are calling for a reading of 50.0, which would be a lightly lower reading than June's reading.

The first look at second quarter GDP is due which will form the "are we in a recession or not?" argument. The employment cost index will help us see if all these price pressures are bleeding into wages, and the employment report will tell us just how poor hiring was for July. A tone of weakness should help trim this week's rise in rates, but just a little.

The most important day of the week is Friday with the Employment and ISM reports being released, but Thursday's GDP release is highly important to the markets and could heavily influence mortgage pricing.

• 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.

Starting Monday, August 4th, this weekly report will be available by email only. If you would like to continue receiving this report, please email me at info@lewcorcoran.com. The daily rate lock advisory report will still be posted on this blog.

As always, you can call me toll-free at (866) 684-1233 ext. 3913 or chat with me online at http://www.lewcorcoran.com/ to answer any questions you have about mortgage programs and interest rates, and to discuss your best loan options.

Current Rates*:

• 30 Year Fixed - 6.625% with 0 Points
• Jumbo 30 Year Fixed - 6.625% with 0 Points
• 15 Year Fixed - 6.5% with 0 Points
• FHA / VA 30 Year Fixed - 6.875% with 0 Points
  
  *Rates and fees accurate as of 7/25/08. 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.

Please keep in mind that the quotes above are generalized. For specific quotes or to get quotes on a variety of other mortgage programs, please give me a call.

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
• Float 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. 

The Senate today (Saturday, 7/26) passed the Housing Bill that was submitted by the House on Wednesday. The vote was 72 for and 13 against, and President Bush is expected to quickly sign the legislation. Among the key provisions of the bill, the program that has allowed sellers to provide down payment assistance to buyers through a Down Payment Assistance (DPA) program such as Nehemiah and AmeriDream will be eliminated as of October 1, 2008. In addition, the bill increases the down payment requirement for borrowers getting FHA loans from 3.0% to 3.5%

Other provisions of the bill include:

• Allowing approximately 400,000 homeowners who cannot afford their monthly mortgage payments to refinance into a more affordable government-backed loan rather than losing their homes. The FHA will be allowed to insure up to $300 billion in new 30-year fixed-rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down loan balances to 90% of the homes' current appraised value. The cost of the new FHA program - which would begin on Oct. 1 and be in place for just a few years - would be funded by fees from Fannie and Freddie, along with fees paid by both lenders and borrowers.
• Permantly increasing the cap on conventional and FHA mortgages in high cost areas from $417,000 to $625,500. Higher loan limits will make it easier for borrowers to get mortgages, because they're more likely to be traded if they are considered conforming;
• Creating a home-buyer credit. The bill includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500. The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments. In addition, the bill provides for business tax breaks for home builders and other large corporations;
• Creating a permanent fund to promote affordable housing. The fund would be paid for by fees from Fannie Mae and Freddie Mac;
• Giving grants to states to buy foreclosed properties. The bill would grant $4 billion to states to buy up and rehabilitate foreclosed properties. The provision of the bill had been opposed by the White House which said it would benefit lenders and not homeowners;
• Granting the Treasury Department broad authority to safeguard Fannie Mae and Freddie Mac. The new regulator will have a greater say over how well funded the agencies are - a major concern in the markets that has sent stocks in both companies plunging; and
• Raising the national debt ceiling to $10.6 trillion, an increase of $800 billion.

My Lock Advice for Today:

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 within 8 and 20 days
• Float if my closing was taking place between 21 and 60 days
• Float 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: 

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

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 20 days
• Float if my closing was taking place between 21 and 60 days
• Float 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:

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 within 8 and 20 days
• Lock if my closing was taking place between 21 and 60 days
• Float 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:

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 within 8 and 20 days
• Lock if my closing was taking place between 21 and 60 days
• Float 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

Rates remained volatile last week as worries about inflation continued to influence the mortgage market. Volatility being what it is these days, mortgage rates are bouncing around quite a bit. Upward pressure for rates one day gives way to downward pressure the next, only to succumb to upward pressure again.

Inflation data continues to hammer headlines and our wallets. News this week demonstrated what we have all been feeling: prices are higher at the pump, the grocery store and anywhere else you use your debit card. Interest rates trade off of bond prices - and bonds HATE inflation. Coupled with this is the concern about a declining economy which could hold rates back a bit. But, the overall trend is higher interest rates for those seeking a mortgage in the coming months.

Fed Chair Ben Bernanke addressed Congress in the semi-annual report on monetary policy last week. While detailing the challenges facing the economy, Mr. Bernanke noted that inflation was above desired levels, and that upside risks for higher prices have "intensified" lately. A Fed seeing a higher rate of inflation usually leads to an upward move in the Fed Funds and Discount Rates at some point in the not-too-distant future. In fact, the Federal Reserve Open Market Committee explicitly noted at its last meeting that "with increased upside risks to inflation and inflation expectations, members believed that the next change in the stance of policy could well be an increase in the funds rate."

This week will be interesting for the bond market and mortgage rates. There are five remaining economic reports scheduled for release, but only one of them is considered to be of high importance to the markets. With data being posted all but one day of the week, we may see some noticeable fluctuations from day to day in mortgage pricing. Generally speaking, despite the lack of a data-packed calendar, I would still maintain constant contact with your mortgage professional.

• 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.