I wanted to address the effect of the Fed lowering rates because it is a very logical question that a lot of people are asking.

The Fed's have lowered prime six times in the past four months, resulting in a reduction of interest rates for short term money (8.25% to 6.0% for prime since October 2007). While cheaper money is a great stimulant for the economy, there is not a direct correlation to fixed mortgage rates.

Below is some real dialogue I had with a borrower this week:

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Borrower: "Hey Britt, just checking in... I am hearing that the Fed is poised to cut rates again in March and April. Does it make sense for us to wait to do the refi until then? I would be bummed to see my mortgage rate drop so siginificantly."

Britt Miller: "You raise a great point being asked by quite a few people. I am going to send out an email addressing it as a whole. But in short, mortgage rates are less impacted by prime, and more affected by bond market.

In actuality, the stock market responds well to a rate cut. This results in a sell off in the bond market as people move into the stock market. As funds leave the bond market, the US Treasury increases the interest they will pay on bonds in order to draw money back to the bond market. Mortgage rates tend to follow the trend of the 10 year Treasury bond. Mortgage rates are set depending on a number of data points, but the driver is the 10 year bond.

Net net, the market is so volatile, and there is no doubt the pinch on the consumer is going to impact wall street and a lot of companies. These potentially unfavorable reports (Payroll, job growth, unemployment, etc) will directly help us more in terms of mortgage rates, than the Fed lowering the federal fund rate another .50 pt this year.

We should proceed and see how the next 45 days shake out and if rates are compelling. I would advise you to 'lock in' -- it makes sense as of today.”

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The 10yr has risen from 3.45% (4 weeks ago) to 3.91% today -- as a result, rates have moved up as well.

If you want to "watch rates" keep an eye on the 10 year go to Yahoo Finance and review at your leisure. It's a very volatile market, and one where I have seen .50% pt swings in one day. Timing the dips can be very difficult unless the file is ready to go.

Best Regards,
Britt Miller, Vice President
Steelhead Capital