Citigroup and other major mortgage lenders have done a strong job of promoting their home loans divisions.  When doing any searches for mortgage rates or watching any news network you will see many mortgage lenders that are trying to help you lock into a lower mortgage interest rate.  It would be a good idea to take advantage of this opportunity before mortgage interest rates start to move higher.

Many analysts and CEOs have predicted that mortgage interest rates are likey to move higher in the very near future.  The Boston Fed President feels that interest rates are likely to move higher in the spring as the Federal Reserve Bank plans to stop purchasing mortgage backed securities at the end of March 2010.  With this being the case there is a good chance that we could see mortgage rates move up one full percentage point.

If mortgage rates do move higher it will be much less attractive to refinance any mortgage.  At the present time many home owners could greatly save by refinancing under 5%.  It is important to note that to get a refinance rate around 5% you will need to have a solid credit score and a significant amount of equity in your home.  If you do not have these two requirements you are going to find it difficult to get a low refinance rate.

Author: Alan Lake

The equation used for the correlation between mortgage rates and the 10 year treasury rate is

y = 2.7283(x)^2 + .5881(x) +.0308.

10 Year Treasury Rate – 3.50%
The correlation shows that the 30 year fixed rate should be approximately 5.47%.  Actual rates…

30 Year Fixed Rate Mortgage – 5.33%

Over the last few weeks, I have mentioned that mortgage rates would likely move sideways or decline in a slight manner; this is exactly what happened.  I fully expected the 10 year treasury rate to fall to 3.4% where it should find support for two reasons.  The 50 day moving average is at 3.4% and the up trend channel shows support at the same exact area.  For more clarity, check out this chart.

If this does hold support for the 10 year treasury rate, look for mortgage rates to find support as well.  I expect rates to be lower this week as the 10 year should fall to its 50 dma but I will make the prediction that we will see a bounce from there and mortgage rates will follow.  With that being said, my mortgage rate predictions for this week are as follows:

30 Year Fixed Rate Mortgage – 5.27%

For any of you looking to refinance or lock in at a low level, now might be the time as a strong support level is going to be tested.  We are sure to see government interaction when the mortgage rate trends upward, but how many treasury bonds can they possibly sell?

10 Year Treasury Rate – 3.506%
The correlation shows that the 30 year fixed rate should be 5.477%, actual rates….

30 Year Fixed Rate Mortgage – 5.35%

Like I said, I seriously doubt we will see a drastic move in either direction so this week is not going to be that important as far as making predictions.  The overall housing market and mortgage industry needs this stabilization period as fluctuating mortgage rates are not good for anyone.

Prediction 30 Year Fixed Rate Mortgage - 5.43%
Actual 30 Year Fixed Rate Mortgage – 5.42

It will be interesting to see where things go, but look for some more stabilization are the volatility in mortgage rates is likely to moderate each week for awhile.  Make sure to use Subprime Blogger for future mortgage rate predictions and information on how to get low mortgage rates.

The best home loans are greatly dependant on your needs.  Many “old school” home buyers will say that there is no way that you should do any type of adjustable rate or exotic mortgage.  The younger generation seems to be quite excited about these types of home loans.  Many young business professionals know they are not going to stay in a home for more than five years so it behooves them to get an ARM and just refinance the mortgage when need be; many times they are in and out of the house before the rate adjusts anyway.

This has come back to bite many home owners recently.  Many young professionals thought they would be promoted or would be making more money so it was not a big deal to have an adjusted rate.  Well, they did not think that the economy was going to turn south and they could actually lose their job.  Unfortunately, even if you are making less money, these home loans are going to reset when they were written to reset no matter what.  This is why some of the best home loans are not adjustable.

If you want to have complete security in knowing what your mortgage rate is going to be, it is wise to get a fixed rate mortgage.  Some people feel this is the best home loan no matter what the situation.  I would not agree with that, but I would agree that most home owners should get a fixed home loan if they do not have a great knowledge of finances and the housing market.  Many home owners just jump into ARMs or exotic mortgages because they see the initial rate is going to be low.  That is all fine and dandy, but what does it matter how low the rate is going to be if your home is going to decline 20% in value over the next six months.

Ultimately, the best home loans are ones that fit your exact needs.  You need to analyze your current situation and decide what you feel comfortable with.  If you want the security of knowing that you are going to get the same rate every month for the lifetime of your loan, a fixed rate mortgage is the best way to go.  If you are extremely savvy with your finances and you are confident that you are going to move out of the current home within five years, an adjustable rate mortgage may be your best home loan.

Freddie Mac’s weekly mortgage survey showed that average mortgage rates for the 30 year fixed rate mortgage this week were 5.38%; this is actually less than my mortgage rate predictions, but I was quite confident that rates were going to fall as the 10 year treasury note has taken a tumble since reaching 4%.  Today we are actually seeing a 4% daily bounce in the 10 year so we will see if that picks up any steam.  Current mortgage rates are likely to remain volatile as the treasury yields have been extremely unpredictable lately.  The best thing for the current housng market would be for mortgage rates to stablize, but it does not look as if that is going to happen.

The 30 year fixed rate mortgage has taken quite a wild ride in the last month.  This is not good at all for the sentiment of the market.  Mortgage rates are hard enough to figure out as it is.  Home buyers want to see stablized, lower rates so they know what they are jumping into.  That has definitely not been the case as average mortgage rates have moved as much as .75% in ONE day over the last few weeks.  Hopefully this is not discouraging home buyers, but be rest assured that it is making people think twice.

Another major factor with current mortgage rates flucuating so much is that refinancing is harder to do.  If home owners were considering refinancing and they see that average mortgage rates have been all over the map, some of them feel it is not worth the time, effort and closing costs to go through with the process.  This is going to hurt the economy even more as it will be less money in the pockets of home owners who are considered prime borrowers.