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Should you lock or float your rate?


The mortgage industry has seen a spike in refinance applications, should you be locking your rate?

The huge drop in mortgage rates has resulted in millions of home owners exploring their refinance options. Indy Mac Bancorp, one of the nations largest wholesale mortgage lenders reported over one billion in mortgage loan locks on Wednesday of this week. The rocky start to the stock market has provided a nice opportunity to refinance into a low fixed rate mortgage. Many home owners are wondering if they should be locking in or waiting for the Fed to again drop rates. Operating under the assumption that most lenders do not offer the opportunity to re lock your loan if rates go down, this can become quite a dilema with your timing. Here is what we know, since Tuesday the 22nd, the ten year bond has moved up over 30 basis points of its trading low, this correlates to about .375 pt's of a move with mortgage rates. This tells us that the current trend is that mortgage rates are moving up. Examining the most recent reductions with the fed funds rates also tells us that when the fed has cut rates, mortgage rates have actually risen on the news. These are two big factors that would have you believe rates may only be heading up, however the big variable that is still unknown is the economic recession. The stock market dropped sharply, pushing rates down largely in reaction to disappointing economic reports, and we will continue to receive updated news regarding the economies health. If you believe the worst is behind the market then logically you would want to lock in your profits and your rate, if you think the market will continue to erode then floating your rate may be your choice. The most important thing is to not lose out on your opportunity to secure your savings and understand your lenders policy regarding rate locks.

1-25-2008 ? LoanNetwork.com





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