Mortgage Rates Make History – Should You Lock?
December 17th, 2008 | categories: Buying Real Estate in Coconut Grove
This Post Is Authored By Our Guest Contributor: James Venney of JuicyEstates.com
The saying goes “the pen is mightier than the sword” which was the case today as 30 year fixed rates dropped below 4.875% for the first time in history! Contrary to popular belief the fact that the Fed lowered it’s “target” for the Fed funds rate to 0-.25% is not why mortgage interest rates dropped. Mortgage interest rates dropped because of what the Fed said not what they did. So what did they say you ask……
The Fed essentially said that they were going to start aggressively buying, among other things mortgage backed securities. Now you might recall that Treasury Secretary Paulson said this same thing about a 10 days ago which is important because when this information was leaked the first time we saw a brief but significant rally in the bond market pushing mortgage rates lower. Today we had a more formal declaration by the Fed that they are a buyer of mortgage backed securities and rates plummeted, but for how long?
I always advise my clients on their interest rate locks and today is no different. I will be advising those clients who are closing in the next 30 days and are currently in a “floating” status to be ready to lock at a moments notice should the current rally looe steam during the trading day on Wednesday or Thursday. My feeling is that the current rally we are seeing in the MBS market is a knee jerk reaction to the Fed’s comments and could be very short lived. Fortunately locking the interest rate those clients that have a full application in process is a simple as clicking a button so my clients are sleeping soundly tonight knowing that I will advise them when we should lock….who’s advising you on your rate lock?