“lock at the price highs, float at the price lows”

Mortgage rates greatly benefited from headline news yesterday. Around mid-morning we learned that Standard and Poor's had cut Greece's government debt rating all the way down to junk. That is as low as ratings go! Stocks, which have rallied for eight consecutive weeks, sold off sharply on the news. This was a positive for mortgage rates because stock selling led to a "flight to safety" rally in the bond market which pushed benchmark Treasury yields lower and mortgage-backed security prices higher. Gains in the secondary market were large enough to allow lenders to reprice mortgage rate sheets for the better.

(see discription of "flight to safety" in post below)

Early this morning the Mortgage Bankers Association released the Weekly Mortgage Applications Survey. The MBA survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole.

Today’s release indicated purchase demand continues to trend higher as the homebuyer tax credit gets closer to its April 30th expiration. Purchase applications increased +7.4% from last week while refinance applications fell 8.8%. It appears that most prospective home owners are looking to finance their home using FHA insured loan programs. AQ discusses a trend toward borrowers putting down less money and its relation to the housing recovery.

If you are hoping to take advantage of the up to $8000 tax credit for first time home buyers or the up to $6500 for repeat buyers, you better hurry. To qualify, you must be under contract by April 30 and your loan must close by June 30. It appears that there is no chance of this government stimulus to be extended

Reports from fellow mortgage professionals indicate the par 30 year conventional mortgage rate is holding in the 4.875% to 5.125% range for well qualified consumers. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect par in the 4.25% to 4.50% range with similar costs but lower FICO score requirements.

In accordance with the “lock at the price highs, float at the price lows” motto....I favor locking all loans closing within the next 30 days.