San Diego Mortgage Rates Report: October 21, 2008

Mortgage rates are finally below 6.0% again.  If you're closing in October, take any rate under 6.0% and lock it in to closing.  In the beginning of the month, I suggested to wait for lower rates if you were closing in the last two weeks of October.  I said:

You can safely delay mortgage locks if your closing after October 17th.  Delaying your lock is a bit different from a "float" recommendation.  It means that you should expect lower rates and jump on one when you feel it's "good enough". The market should remain volatile.  The par rate (with no yield spread premium to the originator) should drift as low as 5.625% in the next 60 days but it may have to go through 6.125% to get there.

We made it through the 6's but never lower than the original 5.875%.  If I still think there is room for improvement in mortgage rates why am I recommending to lock for October closings?

My strategy is more about limiting higher rates than gambling for better rates.  I try to avoid unnecessary risk by being biased to locking unless there is irrational fear.  While I was dead on about the irrational fear in the mortgage-backed securities market, my timing was off.  If you're closing a loan this week, and delayed your lock, I might have cost you some money.

The mortgage-backed securities markets are finally able to focus on the economy now that the drama is over on Wall Street.  Economic fundamentals drive mortgage rates and the economy doesn't look real healthy.  Expect rates to improve to 5.625% and fluctuate between 5.625% and 6.25% through the rest of the year.

If you're closing after November 1, 2008, delay that lock until 5.625% is available.  All October closings, take what you can get today.