Blown Mortgage

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Mortgage rates were down nearly 50 basis points week-over-week (.5%) as the Fed cut borrowing rates and pumped a whole bunch of “dollars” in to the financial markets to improve liquidity. Such a massive swing shouldn’t be taken as a trend, as rates have been all over the board in recent weeks. As we learned in the past you definitely want to take your money off the table when you’re doing well with interest rates. They can easily turn around and bite you with a poorly-timed spike. I say lock now, take your low rate and be done with this market.

Update: See that? As I type this mortgage bonds are taking a turn for the worse, rates should be worsening today. Pick up the phone and lock your rate - pronto.

From Market Watch on the big drop in this week’s mortgage interest rates:

The 30-year fixed-rate mortgage averaged 5.87% for the week ending March 20, down from last week’s 6.13% average. The mortgage averaged 6.16% a year ago. The 15-year fixed-rate mortgage averaged 5.27%, down from 5.60%. The mortgage averaged 5.90% a year ago.

But adjustable-rate mortgages moved little. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.56%, down from 5.58% last week. The ARM averaged 5.91% a year ago. And 1-year Treasury-indexed ARMs averaged 5.15%, up just slightly from their 5.14% average last week. The ARM averaged 5.40% a year ago.

To obtain the rates, the 30- and 15-year fixed-rate mortgages required payment of an average 0.5 point, while the 5-year ARM required an average 0.9 point and the 1-year ARM required an average 0.8 point. A point is 1% of the mortgage amount, charged as prepaid interest.

“Mortgage rates fell this week as various actions were taken to improve market liquidity,” said Frank Nothaft, Freddie Mac chief economist, in a news release. “In addition, the inflation report from the Consumer Price Index reflected weaker price increases than consensus expectations. Unchanged in February both including and excluding food and energy costs, it is the first time the core CPI did not report a monthly increase since November 2006.”

Nothaft also said that the condition of the economy might be weaker than previously thought judging from retail sales figures that fell by 0.6% in February, contrary to the consensus forecast of a 0.2% increase.

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