Trend Reversal: Lock-In Bias Is Back

I wasn’t sure about the new trend of higher mortgage rates.  The nagging thought was that the Fed would continue or expand it’s open checkbook policy, buy mortgage bonds, and keep home loan rates artificially low.

When the whole market melted down, I said “don’t panic“; it was good advice.  Mortgage rates, which jumped from 4.625% to 5.5% in one week, retreated to 5%.  I jumped on that opportunity.  I’ve been cautiously optimistic for lower mortgage rates in late June.

Ben Bernanke’s testimony yesterday spooked me. I’m not so sure he wants to be Sugar Daddy Ben anymore.  I think he’s cutting back on the subsidies.  This signifies a change in “BIAS” for me.  Since January, I’ve been “biased” towards lower mortgage rates because of the milky Federal teat from which to nurse.

Will I still find an opportunity to float rather than lock? Certainly.  As long as there are traders, overreactions will provide that opportunity.  I think those opportunities will be fewer for the duration of 2009.

PS:  I’ve received over a dozen e-mails this week asking my advice on your loan-in-process.   If you are working with another mortgage adviser, you should speak with her first.  If your rate isn’t locked and you’re not getting daily updates from your loan adviser, you need to consider one of these professionals.