Don’t Try to Time the Mortgage Rate Market

Less than 30 days ago amid the frenzy of the housing crisis, the Federal Reserve’s unprecedented rate cuts and the talk of the government stimulus package, a great opportunity to refinance our mortgage arose.

I noticed mortgage rates were falling fast and I started to make some phone calls to a few banks. We were quickly approved and soon the rate on the 15 year fixed fell to 4.75% at Bank of Texas. I called the mortgage broker to confirm the rate on the website and he validated it. We briefly spoke about the future direction of mortgage rates and I was convinced rates would go lower. After all, we had another Fed meeting in a few days where Fed Chairman Ben Bernanke would surely cut rates further – and he did. Bespoke Investment Group did a great job of analyzing the recent mortgage rate trends.

Unfortunately, as I write this tip, rates on the 15 year fixed are sitting at 5.875%. Now I play back my conversation with the mortgage broker. I recall him refusing to predict the direction of mortgage rates but he did suggest I don’t try to time the bottom. Instead lock into a rate that works for me. One that meets my goals.

Now that was a great sales pitch I should have accepted. Lesson learned.