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Unzipped Mortgage Rates Report: September 19, 2008- Change To Float

Date:September 19, 2008 | Author:Brian Brady | Category:Uncategorized

Surprise! It’s time to delay your mortgage rate lock.

Treasury Secretary Hank Paulson is giving a speech, proposing a MASSIVE government purchase of mortgage-backed securities. This action is an obvious attempt to stabilize the volatile mortgage market. His rationale is that this plan (a massive MBS purchase) will cost the taxpayers a lot less than the alternative. Whether or not that’s true remains to be seen. He specifically references the “spread” or yield difference between treasury notes and mortgage-backed securities. If the US Treasury is going to buy mortgage-backed securities to narrow that spread, rates will drop in the near term.

This recommendation supercedes the one from 30 minutes ago. You’ll start seeing mortgage rate quotes, under 6% later today, when lenders reprice their offerings to originators.

Don’t lock that rate just yet and keep checking back.

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Susan 2:25 PM - Sep 21,2008

You might want to let everybody know how much rates went up on the 19th and 20th. Bye bye high fives and hello low sixes. Should have locked when you had the chance.
Brian Brady 9:00 AM - Sep 23,2008

I agree, Susan. I’d been advising to lock up until Friday morning when the market turned. Rates did, indeed rise on the 19th; the markets were closed on Saturday the 20th.

This week is going to be goofy because of the Congressional hearings on the Paulson plan. October closings may find rates below 6% when this is finally passed (and it will pass after the Senators get to talk on TV and act like they know what they’re doing).

Locking now is like selling into a down market. If you’re closing within fifteen days, you might want to take any rate under 6% (par is 5.875% today). If your closing is more than 15 days out, you should be able to pick up 5.75% or lower after this Treasury proposed plan passes.