The Bridgewaters, Massachusetts

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.