Their Primary Mortgage Market Survey (PMMS) is  a composite of survey responses from Monday, Tuesday and Wednesday.  It’s always a little bit off from “current mortgage rates” just due to the methodology.   Most survey respondents would have completed their response before Wednesday’s barnburner of a run that left mortgage bonds up (and rates down proportionately) 59 basis points.

We’re now in the middle of those all time lows of last October near 4.25% and the recent high of just over 5% that we saw only a few weeks ago.

It’s important to remember that when mortgage rates surged before, almost 10% of the purchasing power of the average home buyer was negated just by the increased mortgage rates.

Spring is hitting the housing market this weekend in the Midwest.  There are two things that are certain in Chicago:  By the time that the orange gets here, you’ll get a worse deal on a home and Zambrano will have had at least one total and complete meltdown in the dugout.  Or he might have a Cy Young year so perhaps only one thing is certain:  you’ll get a worse deal on a home if you’re waiting for 70 degree weather.

This year could be worse.  One part is real estate, the other is mortgage related.

If you’re looking for a move-in ready home that has zero work, zero headaches, so are other home buyers.  Over a third of property is distressed.  Forget Case-Shiller.  Whether or not there is another home buyer writing a competing offer immediately and directly influences the price that you can negotiate. The odds of that increase proportionally with how much red is in our temperature forecast.

Second, mortgage rates might or might not go up, but mortgage costs most certainly will for many first time home buyer loans.  We’ve covered the new FHA MIP on April 18th, that’s a direct increase in costs of .25% for about one third of all loans and a very high percentage of the condo-friendly lending in Chicago.

“Buying power” is a real estate measurement and assumes that all home buyers are financial fools and just spend themselves to the max.  That’s not today’s home buyer.  Forget the impact on your buying power, just call it “cost.”  Your cost on the same home can go up 10% just with a normal swing in rates.   For FHA, there is a guaranteed .25% increase in costs just 31 days from now.

If you’re going to buy this spring, you will save money if you are shopping this weekend rather than waiting 30 days.

At closing, we’ve seen mortgage bonds up 44 basis points on Monday and another 22 basis points yesterday.

Today’s interest rates are riding the wave of another 37 basis points as of the 10:30 CDT quote.  That’s a pretty substantial improvement in just the past three days.

It’s a Wednesday so it is time for the weekly Mortgage Bankers Association report.  With little surprise, loan applications are ticking up as rates ratchet down.

The 30 Year v. 15 Year gap continues to widen and it’s interesting.

The 30 year fixed rate decreased to 4.79% from 4.93%; however, the points increased to 1.07% from 0.87%.

The 15 year fixed dropped to 4.03% from 4.17%, but the points here dropped to 0.85% from 1.15%.

It’s the lowest 30 year since January 14th, but the lowest 15 year since December 3rd.

ARMs continue to be historically well-priced, but their share of the market dropped from 6% down to 5%.

What does all of this mean?

It means that you are paying a pretty large premium if you want the bank to protect your loan rate for 30 years.  In the context of how investors think, 30 years is effectively “forever.”

Inflation continues to increase.  Forget the economics terms like the PPI, the CPI or what the European Central Bank is saying.  Inflation is simple.  A gallon of milk cost me $4 the other day.  Gas…ugh, $4.

Remember that our government excludes food and energy from core inflation figures.  “Stuff” is going to cost more.  That means your mortgage payment is worth less to an investor.  By that 20th or 30th year, your mortgage payment isn’t worth as much.   That’s why the great rates on the 30 year are getting pummeled by even better rates on the 15 year.

These low rates are definitely reflective of Egypt, Libya, Bahrain and now Japan.   They’re not permanent.

If you missed an opportunity to refinance last November, it looks like the train backed up into the station one more time.  If you are purchasing, wow, look at the 15 year.  If you can find a way to make the numbers work, this is an unprecedented spread between the 15 year and 30 year.

Jump over the calculator and run a 30 Year v. 15 Year scenario.

It’s probably one of the most common questions asked by home buyers and home owners.

It’s also probably one of the most difficult to answer.  Current mortgage rates aren’t as important as YOUR mortgage rate.  Your mortgage rate is a composite of your credit score, loan-to-value, loan type and possibly loan level price adjustments (LLPA) if you’re looking at a conforming loan.

Yesterday’s Freddie Mac PMMS results showed mortgage rates roughly the same week-to-week.  The current 30 Year Fixed is 4.88%, 15 Year Fixed is 4.15%, adn the 5/1 ARM maintained its unprecedented spread at 3.73% or 1.15% lower than the 30 Year.

But that’s not “current.”

Freddie’s PMMS survey tracks conforming mortgage rates in an ever-so-1970′s model.  In an era of real time, databases, and the technology to fuel “current mortgage rates,” Freddie asks lenders to reply between Monday and Wednesday.

“Today’s Mortgage Rates Unchanged”

You’re going to see headlines from reputable news agencies today saying something like “today’s mortgage rates unchanged.”  So CNN can get a real time video from Egypt from someone uploading over a sat phone after the state turns off the Internet, but CNN has to report mortgage rates from Tuesday on Friday?

Mortgage bonds have been on a tear the last two days and that is not reflected in Freddie Mac’s version of “current mortgage rates.”  How much of a tear?  A big one.  The past two trading sessions have closed up 56 basis points (bps) on Wednesday and 50 bps more on Thursday.

What is a basis point and what does it have to do with your mortgage?

A basis point is a mini point and they’re irrelevant.  However, when a 100 of them get together, you have a point.  We use points in mortgage talk all the time.  A discount point is a 1% up-front fee that buys down a mortgage rate.  So a discount point is also 100 basis points.

When the market cranks at numbers like +56bps and +50bps, now we’re talking real money.  That’s over a full point.

Rates vary between lenders, vary between markets, and vary based on a lot of circumstances.  The relationship between mortgage bonds and mortgage rates holds pretty constant.

To make the math easy, let’s say that I was quoted a mortgage rate of 0.00% paying 1.00% discount points on Tuesday.  Today, that rate should be roughly 0.00% paying 0.00% discount points.  That logic holds true whether rates are 0%, 5% or 10%.

Interest rates directly impact home affordability.  This is great news for the first buyers of the spring market hitting the streets as we speak.

To put it in perspective, that change in rates pushed down home buyer purchasing power by more than 10%.

Rates are rising due to inflation concerns.  This week’s CPI shows a third straight month of increases.  The Cost of Living has hit a record, passing the record set in July of 2008.

Inflation is not the $1.00 difference when a good or service goes from costing $100.00 to $101.00.   Inflation is the reduction in the value of the money buying that actual good.

This is a big deal since we all pay our mortgages with U.S. dollars monthly.  If I promise to pay my lender $1,000 per month for 30 years, the person holding the note is receiving the same payment every month even though the value of that $1,000 is going down.

The only way to compensate is to charge a higher mortgage rate.  We have $600 billion flowing out of the Fed for QE2.  It is, by definition, inflationary.

As mentioned earlier in the week, rates should actually be higher.  If it wasn’t for widespread unrest throughout North Africa and the Middle East, rates would probably be higher.

Unless something massive changes, rates are heading higher over the next few quarters.  Rent will increase.  So will the cost of a candy bar.  You’ll probably see the box of Cheerios get a little smaller for the same price.  All of those things are the result of inflation.

The only number that won’t change is the payment on that mortgage coupon.   If you’re looking at buying a home this year, it might make sense to push up your timeline.

Mortgage rates are up 0.875% since mid-November, causing home buyer purchasing power to fall more than 10 percent since.

Persistent concerns over inflation are a major reason why and this week’s Consumer Price Index did little to quell fears. CPI rose for the third straight month last month.

Wall Street was not surprised.

As the economy has picked up steam since late-2010, the Federal Reserve has held the Fed Funds Rate near zero percent, and kept its $600 billion bond plan moving forward. The Fed believes this is necessary to support the economy in the near-term. 

Over the long-term, however, Wall Street worries that these programs may cause the economy may expand too far, too fast, and into runaway inflation.

Inflation pressures mortgage rates to rise.

Inflation is an economic concept; defined as when a currency loses its value.  Something that used to cost $1.00 now costs $1.05, for example. It’s not that the goods themselves are more expensive, per se. It’s that the money used to buy the goods is worth less.

Because of inflation, it takes more money to buy the same amount of product.

This is a big deal in the mortgage markets because mortgage rates come from the price of mortgage bonds, and mortgage bonds are denominated, bought, and sold in U.S. dollars. When inflation in present, the dollar loses its value and, therefore, so do mortgage bonds.

When mortgage bonds lose value, mortgage rates go up.

Inflation fears are harming home buyers. The Cost of Living has reached a record level, surpassing the former peak set in July 2008. Mortgage rates would be rising more right now if not for the Middle East unrest.

So long as inflation concerns persist, mortgage rates should trend higher over the next few quarters. If you’re wondering whether to lock or float your mortgage rate, consider locking today’s sure thing.

We’ve retraced the highest mortgage rates since April 2010.  According to Freddie Mac, last week saw the largest single week increase in more than a year.  Last Thursday’s PMMS report showed rates higher by .24% and a national average of 5.05%.

Mortgage rates are driven by mortgage bonds.  When it comes to mortgage bonds, higher prices equal lower yields.  Yields to investors run in parallel to the mortgage rates that you and I pay. Similarly, lower prices mean higher yields or mortgage rates.

The price of bonds is fairly closely related to not only our consumer mortgage rates, but the one tool that we have in our arsenal to influence mortgage rates:  discount points.  A discount point contains 100 basis points, represented as “bps.”

Say a mortgage banker quoted you 6% on some imaginary day in the future.  That rate had no discount points.  If the bond went lower by 100 bps, one of two things would happen when you called the banker regarding that 6% rate.  Either the rate would be higher or he/she would advise you that it would cost roughly one discount point to secure that 6% loan.

Why are we talking about this?  Here’s why:

The blue line in our crudely assembled graph is the daily bond performance.  Through Wednesday’s trading, we have had 12 trading days.  There were 8 days where interest rates worsened.  There were 4 days where mortgage rates improved.

The red line is a running total of the damage month to date.  We didn’t have a positive day until February 9th.

We go into today’s trading session down 163 basis points or 1.63 discount points lower than where we entered the month.

The Consumer Price Index hits today.  Any signs of inflation and rates could still move higher.

Mortgage rates are well off their historical lows, but still relatively inexpensive. Before long, that may no longer be the case.

Mortgage rates are surging.

Over the last 7 days, conventional, 30-year fixed rate mortgage rates have jumped 24 basis points, or 0.24%, according to Freddie Mac’s weekly Primary Mortgage Market Survey.

It’s the largest 1-week spike in mortgage rates in recent history.

The 30-year fixed rate mortgage now averages 5.05% nationally. This is much, much higher than what we saw last November when mortgage rates were 4.17% and looked headed to the 3s.

That’s not the case today. In fact, it’s the opposite. 

Mortgage rates have risen quickly and fiercely this year. As of this morning, mortgage rates are higher over 9 consecutive days, marking the longest mortgage rate losing streak in the last 6 years, at least.

Note, however, that when you call your loan officer or bank, you may not be quoted the same 5.05% rate as shown by Freddie Mac. This is because Freddie Mac-reported rates are national averages. Any given mortgage rate may be higher or lower depending on its region. 

As an illustration, look how this week’s rates breaks down by area:

• Northeast : 5.07 with 0.7 points
• Southeast : 4.99 with 0.9 points
• North Central : 5.09 with 0.6 points
• Southeast : 5.06 with 0.6 points
• West : 5.02 with 0.8 points

In other words, the rate-and-fee combination you’d be offered in your home town is different from what you’d be offered if you lived somewhere else. In the Southeast, rates tend to be low and fees tend to be high; in the North Central U.S., it’s the opposite.

The good news is that, as a mortgage applicant, you can have your pricing whichever way you prefer. If getting the absolute lowest mortgage rate is what’s most important to you, have your loan officer structure your loan as in the “Southeast Style”. Or, if you prefer to have as few closing costs as possible and don’t mind slightly higher rates, ask for that type of set-up instead.

Either way, consider locking your rate as soon as possible. If rates keep rising, it won’t be long before they touch 6 percent.