Mortgage Rate Forecast: January 2009

My Lock Advice for Today:

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

• Float 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 any or all 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.

Although the prices of Mortgage Backed Securities (MBSs) have remained relatively stable today (currently up 3/32 from yesterday's close), some lenders are repricing for the worse this afternoon. This is most likely due to the high volume of loans applications they're receiving.  

You will see mortgage rates drop to historic lows, and lenders are going to be swamped with mortgage applications. I encourage you to apply for a mortgage somewhere - anywhere - now, and get the process started. You don't have to lock in a rate today - you can always float and lock in later. If you do, you'll be in a better position to lock in when the rates do drop again and not miss another opportunity for a great low rate.

My Lock Advice for Today:

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

• Float 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 any or all 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...

• Float 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 any or all 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 Backed Securities (MBS) prices continue to climb this afternoon. The FNMA 4.5% coupon is up 28/32 so far today, and is at the high of today's session.

We had expected rates to improve this afternoon, but that is not going to happen. Due to the flood of applications and rate locks many lenders are getting in today, they are now repricing for the worse to slow things up.

This underscores what I've been saying these last several days: You will see mortgage rates drop to historic lows, and lenders will be swamped with mortgage applications. I encourage you to apply for a mortgage somewhere - anywhere - now, and get the process started. You don't have to lock in a rate today - you can always float and lock in later. If you do, you'll be in a better position to lock in when the rates do drop again and not miss another opportunity for a great low rate.

My Lock Advice for Today:

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

• Float 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 any or all 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 Backed Securities (MBS) prices continue to climb this morning as economic data released today show the recession deepening due to mounting unemployment, plunging home values and frozen credit markets. The FNMA 4.5% coupon is up 15/32 so far this morning, and is at the high of today's session. Rates should hopefully begin to improve as the traders have returned from their vacations.

Remember, on MBS, as the price goes up, the yield goes down - and mortgage interest rates go down with it. Conversely, as the price goes down, the yield goes up - and so do mortgage interest rates. MBS closed up 9/32 from its opening on yesterday, and is up another 23/32 in trading this morning. If the trend continues, I expect that mortgage rates will improve by another 0.125% early this afternoon.

As promised, the New York Fed began purchasing mortgage and student debt on Monday, January 5th, in an effort to thaw frozen credit markets and restore confidence in the economy.

"This program, first announced on November 25, 2008, is intended to support the mortgage and housing markets and foster improved conditions in financial markets more generally," the New York Fed posted in a press release on its website. "The $500 billion Mortgage Backed Securities (MBS) purchase program is part of a broader monetary policy initiative geared at stimulating an economy where the interest rates are already near zero." The New York Fed also promises to publish updates every Thursday on how their MBS purchase program is progressing.

The Fed will purchase up to just a few billion dollars worth of MBSs a day to start. Their hope is that the MBS investors will jump on the "buying bandwagon" to help push mortgage rates down. The Feds will then be in a better position to purchase MBSs when "market conditions warrant" which in turn will help keep mortgage interest rates low. We're hoping that mortgage rates will eventually stabilize in the low 4.0% - 4.5% range.

My Lock Advice for Today:

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

• Float 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 any or all 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.

Right now, we don't know how much in Mortgage Backed Securities (MBSs) the Feds plan on buying. But, the Fed says it has started purchasing MBSs today. This is what we've been waiting for. And, MBS prices are already up more than half a point this morning. This means MBS yields - and mortgage rates - will go down. The Fed said they will provide details each Thursday afternoon on the amount of MBS purchases they make each week.

You will see mortgage rates drop to historic lows, and lenders will be swamped with mortgage applications. I encourage you to apply for a mortgage somewhere - anywhere - now, and get the process started. You don't have to lock in a rate today - you can always float and lock in later. If you do, you'll be in a better position to lock in when the rates do drop again and not miss another opportunity for a great low rate.