Mortgage Rates Hit Historic Lows, But Stall on Equities Rally

September 3, 2010

3 September 2010 – Einstein once said, “Put your hand on a hot stove for a minute, and it seems like an hour. Sit with a pretty girl for an hour, and it seems like a minute. THAT’S relativity.” This concept is very important to this commentary as relativity is the guiding principal from which to evaluate the rate roller coaster we saw this week. On the one hand, rates did rise about 0.125%. On the other hand, the rise was from the lowest mortgage rates in history.

As the Dow slipped below 10,000 early in the week, rates for Fannie Mae and Freddie Mac conforming 30-year fixed rate mortgage loans averaged 4.125%. This was a boom for borrowers with loans in process who were poised to lock. A flood of not-so-bad news in manufacturing, housing and retail sales, however, was enough to incent investors to emerge from the safe confines of the bond market into equities toward the end of the week. This pushed mortgage lending rates up a bit with lenders offering 4.25% to the most qualified applicants. The stock market rally, however, may not last as the overall economic situation, especially regarding employment has not changed.

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PREPARATION IS KEY TO SECURING THE BEST MORTGAGE RATE

The best overall advice that I can give to those considering a transaction is to think like a boy scout and be prepared. Getting the best rate is a matter of keen timing and most loan approvals are good for at least 30 days. This can be extended with updated documentation. This strategy not only allows prospective borrowers to pounce on the best rates as they emerge, but also to secure shorter lock periods and the better pricing that they bring.

I am recommending any of my clients closing within 15 days to LOCK their rates as we have no way of knowing whether this rally in equities will last a day, a week or a month. For clients closing more than 15 days from now, I am recommending FLOATING as even a sustained rally will likely be bumpy enough to provide opportunities to LOCK at favorable rates.

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About Doug Katz

As the Senior Mortgage Banker and Sales Manager for Chicago Bancorp, Doug not only originates loans for his personal business, but also oversees affiliations with banks and other financial institutions that depend on Chicago Bancorp to meet their client’s lending needs. In this role, Doug directs the day-to-day mortgage sales operations of over 25 branches in a multitude of Chicagoland’s diverse communities. He brings to these relationships a wealth of industry experience and a dedication to an exceptional client experience that has established Chicago Bancorp as Chicago’s pre-eminent mortgage solution providers. Prior to joining Chicago Bancorp, Doug attended and graduated from West Point. Upon graduation, he was commissioned as an officer in the United States Army Artillery, where served 5 years in numerous roles and in various deployments include service in Kuwait. In addition to his Bachelor’s Degree from West Point, Doug holds an M.B.A. from Loyola University Chicago, where he was also inducted into the Beta Gamma Sigma Honor Society. He also served as President for the West Point Society of Chicago from 2003 to 2005 and still serves on the Board of Directors. When not working, he spends his time with his wife and three children in their hometown of Oak Park, as well as pursuing his passions for fitness, cooking and the banjo. Doug can be reached by phone at 312.738.6079, by email at doug@chicagobancorp.com, on his own blogs, BankerDoug.com and Vet Money Matters. He's also on LinkedIn.