Juicy Estates: Mortgage Blog

South Florida Interest Rate Update…Should You Lock?

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?
Should You Lock?

The current situation reminds me of the pioneering punk rock band The Clash and Should I Stay or Should I Go?  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 loose 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?

This entry was posted on Tuesday, December 16th, 2008 at 10:48 pm and is filed under Interest Rate Updates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply

Name

Email (will not be published)

Website