Professional Home Staging and Photography Blog: The Daily Mortgage Interest Rate Lock Advisory - June 25, 2008

The Daily Mortgage Interest Rate Lock Advisory - June 25, 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
  • 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.

 

East Bridgewater, MA 02333
Phone: (508) 443-1332

Lew Corcoran, ASP®, IAHSP, IAHSP-CB
Accredited Home Staging Professional
Professional Real Estate Photographer

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Comment balloon 5 commentsLew Corcoran, ASP® • June 25 2008 11:00AM

Comments

 

I am currently in a 5 year fixed at 5.99% with 2 more years to go. Should I roll the dice and hope I will be ok in 2 years or shall I try to get a 30 year fixed right now.

The problem is that most economists agree that inflation is going up, not only in the USA but everywhere else in the world. Boom economies such as China, India and Russia continue enjoying healthy growth while experiencing inflation from 6 to 9%/year and their governments do not show any signs they are planning to slow things down.

Warren Buffet also believes we will see higher inflation over the few years.

What do is your opinion/suggestion?

 

 

Posted by Dutch over 10 years ago

That's hard to say. None of us can predict where interest rates will be tomorrow, next week, or next month let alone what will happen in the next year or two.

Here's what today's comments from the Feds basically mean: Concerns about growth have diminished. Consumer confidence is the lowest since 1979, and the overall economy doesn't look like it will improve any time soon. That's good news for bonds and mortgage rates. The Feds expect inflation to moderate. However, considering other factors, uncertainty about inflation outlook remains high. Inflation is bad news for bonds and mortgage interest rates.

If inflation (and fears of inflation) can be held in check, we might start to see improvements in mortgage interest rates soon. But we're not out of the woods yet. While core inflation remains relatively low, higher inflation is still a very real possibility with the continuing high oil and food prices. I expect the Feds will start raising short term interest rates before the end of the year to help keep inflation in check.

Also, keep an eye on Israel and Iran. I expect we'll see action there before the end of the year while we still have a Republican president sympathetic to the Israeli's cause. That's a powder keg waiting to explode, and if it does - well let me just say that if you think gas prices are high now.... And guess what that will do to inflation (and mortgage rates).

The rates can go only so much higher before people "balk" at buying homes (or buy less home than what they really want). We're already experiencing a slowdown in mortgage applications, so I expect we'll hit an upper limit relatively soon if mortgage rates continue upwards. Will people still buy and sell homes? Sure. Job transfers, better opportunities, and many other factors cause people to move. Also, don't forget homes in many areas are still declining in values, and the foreclosure rate continues to escalate. And, there are many ARMs still waiting for an upwards adjustment in the next 2 - 4 years.

While on the subject of foreclosure, that brings me to another point. I used to think that the Feds were deliberately letting the dollar devalue against world currencies to finally bring the trade imbalance in check. Now I think there's another reason. Many ARMs are tied to the LIBOR - that's the London Interbank Offering Rate for world currencies. The LIBOR is essentially tied to the value of the US dollar. If the value of the US dollar goes up, then the LIBOR index goes up, and so do the adjustments in the LIBOR ARMs (read: higher monthly mortgage payments for people in the ARMs with a LIBOR index). However, if the value of the dollar drops, then the index drops, and the adjustments in the ARMs won't be as severe. This is all to help diminish the rate of foreclosures here in the US. The downside is everything costs more, especially foreign goods and oil, adding to the fear of inflation. And if the prices of foreign goods rise, so will domestic goods. The Feds won't admit this, and I may be off base. But IMHO....

Without knowing all of the details of your current situation that I would need to determine whether or not you should wait, I'm going to stretch a bit and say "wait" and continue watching the markets. You still have a couple of years before your rate adjusts. Just bear in mind that interest rates are based on numerous economic, financial and credit based factors that adjust daily. And when rates do come back down to a level you feel comfortable with, "bite the bullet" and refinance. Just remember, it always seems more painful to have not refinanced when you should have and watch rates go up as opposed to waiting and then watching rates get a little better. 

Posted by Lew Corcoran, ASP®, Home Stager & Real Estate Photographer (Scena Home Staging & Decora Photography) over 10 years ago

Lewis, your blog is a great tool for myself as an agent..I just wanted you to know I appreciate the info..I am going to subscribe to your blog..and I might have a few buyers to send your way..Cheers!

Posted by Tara Stone, NJ Estates and Stables (NJ Estates & Stables) over 10 years ago

I'm here at your service, Tara! And thanks for the kind words. I appreciate it.

Posted by Lew Corcoran, ASP®, Home Stager & Real Estate Photographer (Scena Home Staging & Decora Photography) over 10 years ago

 

Lewis, thanks a lot for your feed back and as Tara mentioned your info is very helpful. it remains a crap shoot with all these variables of which in a globalizing world we (USA) or the feds for that matter have less and less influence. I am active in the chemical commodities industry and for many products prices have doubled and some even quadrupled over the last 6 months as result of the oil and gas price increases of late. And as Warren Buffet believes, its not the speculators/investors who have been driving prices up, it is supply and demand and that may be the fine lining driving the inflation for the next coming years. anyway, back to the christal ball.

as far as my situation is concerned, with a 30 year mortgage (now 27 years) and a pricipal of usd 300K I believe if I would lock in within the next couple of months at 6.5% or even 7% , that may still be a decent deal raising my monthly mortgage bill by max usd 300.00 .

but then again, my mortgage company tells me that they may be willing to add an additional 3 years and they end of my turn which means that my term would expire in 2013 and one would hope by then things have eased a bit. An other benefit to continue is that I am paying down more on my principal.

Anyway, for now I may just hang in there unless somebody comes with very good arguments to make me lock in which will cost me approx usd 3000.00 .

Dutch

Posted by Dutch over 10 years ago

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