Mortgage Rates Are Range-Bound And, Therefore, Are Doomed To Rise

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Mortgage rates in Cincinnati are low.  Really low.  Like, 30-year-fixed-under-5-percent low.

It's astounding, really.  Mortgage rates weren't supposed to drop this low but that's not stopping people from looking the mortgage gift horse in the mouth.

Mortgage Rates Are Range-Bound

Lately, we've been talking about technical trading. "Technical trading" sounds complicated but it's not.  Technical trading is all about patterns and the markets' tendency to repeat itself over time.

Ironically, technical trading can be a self-fulfilling prophecy. If investors expect a certain pattern in pricing to occur, they make trades around that particular expectation and, ultimately, it happens.

Technical trading may also describe why mortgage rates can't seem to fall too low, or rise too high.  Looking back almost a year-and-a-half, the mortgage bond market can't break a range.

But don't just take my word for it -- check the chart plotting the Freddie Mac average 30-year fixed mortgage rate between December 2008 and May 2010.

Rates break above 5.250 percent and fall below 5.000 at times, but spend most of the time in between.

Freddie Mac Mortgage Rates Aren't "Zero Points" Rates

Right now, we're below 5 percent.  Rates are terrific.  But there's a catch! The Freddie Mac rates aren't "real" rate quotes -- they're partial rate quotes.

Freddie Mac's reported rates don't account for the mandatory discount points required to actually get the rates.  The mortgage rate is only half the puzzle, in other words. To get your loan officer to give you the Freddie Mac rates, he'll ask you to pay an average of 0.7 points at closing.

Alternatively, you can opt for a zero-points loan.  This will result in the lender raising your rate by about a quarter.

Patterns Repeat And 5 Percent Rates Will Return Soon

Mortgage rates are rising. 5 percent, 30-year fixeds will be here soon.

Look at the patterns in the chart to see for yourself.  Last week, mortgage rates fell to the same low levels as 3 times before, and, each time, rates bounced right back to 5 percent:

1. March 2009
2. May 2009
3. November 2009

Oh, and also worth noting?  Mortgage rates haven't come close to that fabled "no closing costs at 4.500 percent" setup that people seem to be holding out for.  It's never existed and, based on patterns, it probably won't.  Not unless you opt for an adjustable-rate mortgage (which is fine, too).

You can send me an email about switching to an ARM if you have questions.

Lock Your Mortgage Rate Before Mortgage Rates Rise

Mortgage rates are unnaturally low today.  They will rise back to 5 percent or higher. Right now, they're less than that.

If you're scouting mortgage rates and wondering what today's pricing look like,and I'll help you get the day's rates for your individual situation.  Rates change quickly so send the email right away. Even one day too late can be one day too late.

It happened last June. Rates rose one full percent in just a week.  Really!

I answer all my own emails. .