There’s Only An 18.60% Chance That A Morning Mortgage Rate Quote Will Be Honored By The Afternoon

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If the changing mortgage guidelines don't bedevil you, changing mortgage rates will.  The pie chart above puts it in perspective.

The data from July-August is even more astounding when we compare it the data from April-May 2008.  Back then, we commented that locking a mortgage rate was tougher than ever because mortgage rates were changing so frequently.

But "than ever" is a relative comparison.

Today, rates are moving 33 percent faster than the breakneck pace we identified in May, complicating the process of shopping for a mortgage.  And, when a person passes on the morning pricing, he may find that the afternoon pricing to be a lot less attractive.

To apply this example to real life, it's somewhat like eschewing the gas station in the morning, and then seeing higher gas prices posted in the afternoon.  There's nothing you can do about it, of course -- you still need that gas.  So, you end up paying whatever it costs.

But when we talk about gasoline, it's just a few cents per gallon.  But, when we talk in terms of eighths-of-a-percent on a mortgage, it's a few thousand dollars over the life of the loan.

That's a big difference.

When you're shopping for a home loan, remember that Wall Street often sets the rates -- not the loan officer.  Your best protection from mortgage rate volatility, therefore, is to saddle up with a pro that understands how Wall Street works, and then be prepared to lock your mortgage rate as soon as possible.

As an example, think back 6 months.  On January 23, 2008, 30-year fixed mortgage rates dipped to 5.125% and stayed there for fewer than 3 hours.  The 30 days that followed was a complete unravel. 

Shoppers that were prepared when rates dipped in January now have very low mortgage rates.  Everyone else doesn't.

Volatility comes from economic uncertainty and that should continue at least through the rest of the year and probably deep into 2009.  The best protection from it is simple -- make like a boy scout.