17 December 2010 – This week in mortgage interest rates could have been worse. While we started with another upward climb, rates for Fannie Mae and Freddie Mac mortgages retreated a bit by Thursday. Based on the extreme pain of the last 30 or so days, this was jump up and kick your heels together news.

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As far as economic news goes, there was a slew of information. The traditional end of the year lull has had a counterbalancing effect, however, as financial institutions are more focused on closing out their books. The primary driver for movements that we did experience was the updated guidance from the Federal Open Market Committee, which defines their actions for the near future. The news was not encouraging as it seems Quantitative Easing is likely to continue. The initial announcement for Quantitative Easing hurt rates and this was no different. As the markets reacted, rates touched 5% before receding in response to an oversold bond market.

As I often do, I am going to go off on a tangent. I have been getting the “will rates go back down” question more and more lately. The short answer is the I wish I knew. While I do provide some lock advice, this is based on the typical fundamentals of the market. Many of these went out the window weeks ago. Additionally, the secondary market is just not providing the improvements that it should on days when you would expect beneficial rate movement. As a result, all that I can say is that practicality and pragmatism should rule your decision process. If the rate is fair and affordable, you can rarely go wrong.

My mortgage rate lock advice for my clients is unchanged. IF closing in 7 days or less LOCK. If closing in 7 to 30 days or less, there may be time to take advantage of a correction. LOCKING would be a very conservative way to go, but if your risk tolerance permits, you could FLOAT with a LOCK on ANY price improvements. For those closing in more than 30 days, I would suggest FLOATING with extreme caution