What a wild week this past one was for San Diego mortgage rates. On April 14, 2008, I advised folks who were closing in the month of April to lock rates; mortgage bonds plummeted from 101 to 99.5. If you were closing in April and didn't lock your mortgage rate, it would have cost you about 1.5% in discount points to get that same mortgage rate, on Thursday- that's $7,500 extra in closing costs for a $500,000 loan!
I also advised that all May closings float. Mortgage bond prices rebounded to 100.5 today; I still think there's room for upside in the mortgage bond market which means lower mortgage rates. I don't have high hopes for the American economy through the summer. The foreclosures, weak housing prices, and credit crunch have closed the consumer's "virtual ATM ". Higher food and fuel prices are starting to take a bite out of the consumers' budget. A gallon of gas and a gallon of milk both cost in excess of $4. In past years, a homeowner would suck it up and throw the money on his HELOC. Now, with HELOCs frozen, the consumer has to tighten his belt.
The consumer drives much of the American economy so his tightened belt means less spending. That should hurt this economy until we see the banks loosen up a bit.
Will we see lower mortgage rates in May? I think so but the volatility of the mortgage bonds market still compels me to advise home buyers to lock their mortgage rates for transactions closing within 14 days. All longer closings should float...for now.
