Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on December 17, 2008

Locking Stance: LOCKING    Mortgage Bonds: +41bp

As yesterday drew to a close, I switched to a locking stance for the same reasons I am going to restate here.  While there still may be a reduction in mortgage rates ahead, we are about as low as we can go as far as what you will receive in pricing from lenders.

First off, the Fed announcement yesterday that they would keep buying mortgage backed securities is artificially inflating bond prices as traders want to ride the “gravy train” and profit from statements like that.  After the dust settles, traders will begin to bail out of their positions leaving the Fed with the losses, or at least the sole buyer.  Demand will weaken and we may very well be seeing the popping of the “mortgage rate bubble” soon.

Knowing that this will likely happen, lenders are already beginning to price in a “hedge” to protect themselves.  You see, when you lock your loan, you get today’s pricing with a “premium” built in, much like when a trader buys an option, such as a call or put.  That premium is because of the risk the lender takes while they hold the loan and cannot resell it since they cannot dump it until after you close and it gets to the open market.  If the markets crash, the will get stuck with huge losses like they did back in August 2007, when this whole thing really got moving.

The only data on the agenda for today is Crude Inventories, so don’t expect much movement from that release.

What does this all mean for Florida Mortgage Rates?  Once again, the risks of floating are outweighing the risks of just locking in today.  The chances are that you will not see much better mortgage rates from here on out.

{ 1 comment… read it below or add one }

Kevin Sandridge December 17, 2008 at 10:25 am

Hey Robert, awesome review – and very useful site. Seriously – the volatility out there is maddening, so it’s very nice to have a beacon in the storm! You provide that.


Kevin Sandridge

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