Shopping multiple lenders for a “good mortgage rate” can sometimes save you 1/8 percent on your rate and/or a few hundred dollars in fees. However, when it comes to getting the best mortgage rate, you’re going to more than good research skills.
You’re going to need some luck.
Mortgage rates for people in Illinois or anywhere else, for that matter, are unpredictable, ever-changing, and rarely change as expected.
For example, when the Federal Reserve left the mortgage market March 31, 2010, analysts said that mortgage rates would rise by a half-percent or more. It was practically stated as fact on TV. When April 1 came around, though, rates didn’t rise.
Instead, a volcano erupted and mortgage rates dropped on safe haven buying.
Then, a week later, as the volcano ash cleared, mortgage rates were supposed to resume their rise. Only they didn’t. Instead, a debt crisis emerged in the Eurozone and mortgage rates dropped.
Since March 31, conforming mortgage rates are lower by roughly 0.125 percent, according to Freddie Mac’s weekly mortgage rate survey. At today’s rates, the savings are roughly $20 per month per $200,000 borrowed — or $100 per month based on their original, post-March 31 forecast.
It brings us to one of the most important axioms in rate shopping: You can’t shop for good luck.
- On some days, rates go higher
- On some days, rates go lower
- On some days, rates stay the same
Occasionally, there are days when rates do all three.
As a home buyer or would-be refinancer, what rate you get depends on at what time of day you do your shopping.
You can’t predict what will happen next in mortgage markets — even just an hour from now. Therefore, the smartest move, sometimes, is just lock your rate now. At least that way, you’ve got a guarantee.
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Mortgage markets improved to their best levels of 2010 last week, aided by events half a world away and ongoing safe haven buying. Greece’s debt problems continue to help mortgage rate shoppers in Oak Park and around the country.
Conventional mortgage rates dropped last week, ARMs falling more than fixed. FHA mortgage rates also improved.
Global concern for the Greece Situation are so strong that markets even shrugged off April’s blowout job report. On most other days, mortgage rates would soar on better-than-expected jobs data — especially coming out of a recession.
The Department of Labor’s April Non-Farm Payrolls reports:
- Payrolls have been net positive for 4 straight months
- Nearly 600,000 jobs have been created thus far in 2010
- Monthly job growth posted its biggest gain in 4 years in April
Additionally, more than 800,000 Americans re-entered the workforce in April in search of work. As a result, the Unemployment Rate jumped by 0.2 percent — another positive sign (in a roundabout way).
But again, Wall Street wasn’t watching jobs — Wall Street was watching Greece. And Greece was in riot.
This week, without much new data due on the economy, mortgage markets should continue to take cues from Greece, the IMF and the Eurozone. If a bailout agreement can be reached that investors feel is effective, the safe haven buying that’s led rates lower will recede and mortgage rates should rise.
Conversely, if an agreement is reached that investors deem ineffective, or no agreement is reached at all, mortgage rates should drop.
Each week for the last four weeks, we’ve talked about Greece and its pending bailout and how it might impact rates because each week the bailout appears imminent. Even this week, the market opens with the news that the IMF has approved a $40 billion lifeline to Greece. Maybe this will be the news that finally turns the mortgage market around.
Mortgage rates are unnaturally low right now and should change direction quickly. The problem is nobody knows when that will happen so be careful when rate shopping and keep an eye on the market.
Mortgage rates may fall further, but when they turn higher, they’re going to turn quickly.
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