On Mortgage Rate Movement

February's mortgage market could be categorized as "on edge". For the most part, rates didn't change intra-day. It was common for lenders to issue rate sheets in the morning and stick to their pricing through market close. However, there were two days on which 3 rate sheets were issued, and 1 day on which 4 were issued.

According to Freddie Mac, Primary Mortgage Market Survey results are collected Monday through Wednesday, then published to the public Thursday. By design, therefore, the survey lumps mortgage market activity spread across 3 days into 1 single point of data. Survey results are skewed, therefore, based on the when survey responders get back to Freddie Mac. Last week, this point was painfully clear.

Thursday, shortly after the markets closed, the Federal Reserve announced a 25 basis point increase to the Discount Rate. The Discount Rate is now 0.750%. Mortgage markets are selling off on the news. The Era of Low Mortgage Rates may be officially over.

On average, mortgage lenders issued just 1.4 rate sheets per day in January, or 7 per week. Mortgage rates haven't been that stable on day-to-day basis in 10 months. However, stability has a way of unwinding rather quickly. Here's what to expect in February.

If you want to know where mortgage rates are headed in the future, you may be better off ignoring the experts. I conducted a 50-week study of the popular Bankrate.com Mortgage Rate Trend Index and it showed that the "expert consensus" on mortgage rates is wrong 3 times more often than it's right. That's not good.

Like in 2006, 2007 and 2008, Autumn 2009 is marked by falling leaves and falling mortgage rates.

The trend looks more like a pattern.

Based on Freddie Mac data of the last 4 years, 30-year fixed mortgage rates rise from January through August, and fall through fall. There's 6 weeks left until January. The clock may be ticking for today's home buyers and rate shoppers.

If history is an indicator, mortgage rates should ease a bit into 2010. Data from Freddie Mac since 2006 shows that 30-year fixed mortgage rates tend to rise during the summer months, and fall through the fall. So far, 2009 is staying true to form.

Thursday, Freddie Mac published its weekly mortgage market survey. The report showed mortgage rates sub-5 percent, trolling near all-time lows. Versus October 2008, 30-year fixed mortgages are down 1.07%. The press was eager to report this story -- mostly because anytime mortgage rates below 5.000 percent, it makes for good copy. But, for rate shoppers in Cincinnati and Chicago, by the time Friday's business section was delivered, the Freddie Mac survey was already out-of-date.

When it comes down to it, there's only 1 thing that controls mortgage rates. And it's not the 10-year treasury note.

Based on how the mortgage market's been moving lately, on 2 out of 3 days, a morning rate quote from your lender is going to be expired by the afternoon. It makes shopping for a mortgage a complicated business. On average, rates are changing every 4 hours, 2 minutes.