Thread: Buying a House - Interest Rate Question

Originally Posted by ExtremeWX

HI all,
I'll be purchasing a house (to be built over 5 months) within the next week or so.

My question is...
Are the mortgage rates going to continue to drop, or will they start to climb back up? I'll have to make a decision to lock in the rate, or wait a few months hoping for a lower rate.

I've read somewhere that if the Feb cuts rates, it does not necessarily mean the mortgage rates are cut also.
Can anyone shed some light on this for me? How are mortgage loan rate derived?

Thanks!
Bryan

Bryan,

Mortgage rates are derived from long term treasury yields, such as the 10yr yield(^TNX on Yahoo.com). Money usually flows from bonds to stocks and stocks to bonds. For example, if the stock market perceives the Fed cut as bullish, then interest rates will rise that day and maybe more. The opposite is also true if the stock market perceives the Fed cut as bearish.

The decision to lock in at today's rate is a tough one at the moment. IMO, interest rates have shot up dramatically in the last few weeks. They might be at a short term top. It's currently at 6.125% for a 30 yr mortgage. I'm willing to bet that rates will drop soon.

You might want to inquire about a floating lock. I'm not sure if that's the correct term for it. It allows you to lock in at today's rate, but with the option to float down .50%, if rates drop. It will at least protect you in case one of the CDO bond insurers get a bailout. A bailout for ABK or MBIA, will shoot rates to the moon.

If you follow my account talk thread, you will get my opinion on bonds and yields(interest rates) on a daily basis. I post about bonds just about every day.

Good luck.

Adding to this--
You can view graphs of the rate trends at bankrate.com and can view the opinions of their analysts each Thursday under their Mortgage analysis. There have been some intersting small windows where rates have dropped significantly(.50- 1.00 ) these past 3 months but only for a few days then they've been up again. Seems like it's only to clear bank inventory. Since we are almost into spring buying season, there may not be any more of these curious 2-3 day drops. Inflation is also a rate nemesis so we may see rates going higher permanently. Remember rates and prices should balance. As rates go up prices should fall and vice-versa.

Thanks to both of you for your replies....
Bryan

most institutions can lock you in at a set rate but give you an option to lock in lower if the rate drops. Lock in roughly 30 days from finish of construction.

I'm getting ready to lock a rate. Anyone got some insight on how the rates will rise or fall over the next couple weeks?

I'm afraid that inflation due to oil and other comodoties are going to increase mortgage rates...

Please give me your opinions.

Thanks!
Bryan

Originally Posted by ExtremeWX

I'm getting ready to lock a rate. Anyone got some insight on how the rates will rise or fall over the next couple weeks?

I'm afraid that inflation due to oil and other comodoties are going to increase mortgage rates...

Please give me your opinions.

Thanks!
Bryan

rates seem fairly steady but in my opinion, the trend will be increasing more so than decreasing.

Check trends here:
http://www.mortgage101.com/Articles/...y.asp?p=mtg101

Hello Fellow TSP'rs, Any thoughts on impact of Citigroup's planned additional lending on mortgage rates?

"Citigroup said Tuesday it will spend $36.5 billion to issue mortgages, buy mortgage-backed securities, extend credit card lines, and make other loans in the coming months.

The plans arrive after the bank received $45 billion in capital from the federal government in two installments late last year. The extra capital allows the bank to borrow more money from various funding sources, and then lend that money out to others." From comments by the U.S. Treasury.

May not be enough to make a noticable impact.