Proof: Mortgage Rates Are "Expiring" Within Hours

Since the Fed made its emergency rate cut in January 2008, we've talked a lot of mortgage rate volatility. Some days up, some days down, most days all over the place.

This pie chart should help put it in perspective.

Over the last 60 days, mortgage rates changed twice daily on average -- once in the morning, and once in the afternoon. On a quarter of the days, they changed 3 times.

Mortgage rate shopping ain't as easy as it used to be, folks.

No longer can rate quotes at 9:00 A.M. be compared to rate quotes at noon and there are two ways to help navigate the storm:
1. Do your rate shopping in a compressed timeframe. Think minutes, not hours.
2. Ask your loan officer: "Was there a recent reprice, or do you expect one soon?"

If you don't want to do these things (or don't have the time to do it properly), know that you are welcome to reach out to me directly by phone or email. I enjoy working with my readers on their personal home loans and hope you'll remember that I not only write blogs, but I write mortgage loans, too.

See, mortgage markets are different from a year ago when markets "knew" that the economy was experiencing runaway expansion; or, six months ago, when markets "knew" that the economy was experiencing rapid contraction.

Today, nobody knows anything for sure.

Economic experts can't figure out whether the U.S. economy is expanding or contracting and that's why each financial quake, blip and tremor sends mortgage markets into a frenzy -- market players are seeking equlibrium.

The inevitable result is that mortgage lenders freeze pricing on the double and re-issue new rate sheets that reflect the market's new balance.

And as long as uncertainty about the economy persists, mortgage rates should continue to yo-yo. Sometimes two, three or four times per day.

What Aristotle Can Teach Us About Locking Mortgage Rates Instead Of Floating Them

Aristotle bestowed the gift of syllogism upon the world and thousands of years later, it is still believed to be the core of Western logical thought.

A simple syllogism goes like this:

Mortgage bond markets are unpredictable
Mortgage bond markets dictate mortgage interest rates
Therefore, mortgage interest rates are unpredictable

For as much as guys like me can have a vague idea of what can
push mortgage rates in one direction or the other, there's always something that comes out of left field to surprise us.

The syllogism says that predicting the future of mortgage rates is a waste of energy.
Mortgage bond markets are unpredictable because the world is unpredictable. We can try to make sense of it, but there are a near infinite number of variables to the equation.

Lately, we've been focused on economic events like Unemployment Rates and Retail Sales. We also spent time on loan-level pricing adjustments. Pretty soon, we'll add Hurricane Season and oil pipelines to the mix because that will have an impact on mortgage rates, too.

It's like juggling six balls at once and then being told to go stand on a ladder. There's just too much to which to pay attention.

And then -- to make predictions even tougher -- mortgage rates are moving with a tremendous amount of velocity right now. Over the last 60 days, the nation's largest lender is averaging 2.13 rate sheets per day. That's the shortest rate sheet lifespan in recent memory.

It also means that mortgage rate quotes are expiring extremely fast.

So, except in rare circumstances, the mortgage rate syllogism is why I advise mortgage applicants to lock a mortgage rate in as soon as possible. "Floating" can be risky in an unstable mortgage market.

Today's rates and payments may look good, but as Aristotle reminds us, tomorrow's this afternoon's rates and payments could look completely different.