June 20th, 2009

Dangers in Playing the Mortgage Rate Waiting Game



“More people get burned trying to time the bottom of the mortgage market than the top of the stock market.”
–Keith Gumbinger

When mortgage rates sank to the lower end of 5% last month, hordes of borrowers began the refinance process, eager to cash in on a lower rate. Even when the rate was close to 5%, some borrowers waited for rates to drop even lower.  Now that the recent spike in mortgage rates has ended the refi dream for many, some borrowers are blaming themselves that they didn’t lock in fast enough.

While we can understand why you want rates to fall as low as possible — and even when rates peaked on June 11 at 5.81%, that’s still considered a historically low rate — one of the main reasons that rates stalled is that our economy is showing signs of improvement. Originally, rates dropped like they did because of the recent economic turmoil and the fact that the Federal Reserve was distorting the marketplace by buying up billions of dollars in mortgage-backed securities.

In order to push rates back down, economic calamity would have to return, such as the collapse of a major bank or a massive selloff in the stock market. “If it means saving $250 per month on your mortgage but it costs you $50,000 in your 401k, how could this be seen as any kind of benefit?” asks HSH VP Keith Gumbinger.

When Will Rates Fall?

Our readers have been very curious whether we believe rates will once again retreat to where they were a month ago. While there has been some downward pressure in recent days, we really don’t expect rates to reclaim the 5% territory anytime soon.

“Could we revisit the ultra-low rates of later Winter and early Spring? Possibly, but if they do show themselves it might only be for a very short window, and borrowers will need to be in a near-perfect position (i.e. mortgage application in place already) to take advantage of them,” said Gumbinger. “Other than that, it’s unreasonable to expect 50-odd year lows for mortgage rates to be a permanent feature.”

Trying to predict when and how far mortgage rates will fall, “is like predicting who is going to win the World Series in January,” said Guy Cecala, publisher of Inside Mortgage Finance.

The best advice we can give is to always be prepared. If you’re interested in refinancing, have a rate in mind so if rates are trending downward, you’ll be able to lock in quickly and save. Waiting for rates to fall “just a little bit lower” can get you into trouble if rates decide to shoot upwards.

If available at a reasonable cost, consider a “float-down” option where you can get a lower rate if it becomes available during your commitment period.

Better still, don’t play the mortgage rate waiting game. Use HSH’s refinance worksheet to find out the rate you’ll need to save some extra money each month. If a rate is available which works for you, take it. Good luck.

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4 Responses to “Dangers in Playing the Mortgage Rate Waiting Game”

  1. Esko Kiuru Says: June 21st, 2009 at 5:35 pm

    Trying to time the bottom of mortgage rates is futile, say the market pros. If you are anywhere near the bottom when buying or doing a refinance, that’s terrific. Like now with the rates in the low 5’s, jump on it. That is cheap money by any measure. Even 6% money is cheap. We probably won’t see rates again below 5% for another while.

  2. Tim Manni Says: June 22nd, 2009 at 10:39 am


    We completely agree!


  3. Ed Ferrara Says: June 22nd, 2009 at 11:37 pm

    Idiotic to hold out with rates in the 4’s just as it’s not a smart move to wait it out with rates at 5.5%. I’m a financial writer for and post daily jumbo mortgage rates and warned against waiting to many. I’m sure just as blackjack player can’t quit while they are ahead because of the human psyche homeowners gambled and lost as well.

  4. Tim Manni Says: June 23rd, 2009 at 2:59 pm


    Borrowers have to be prepared right? I can’t blame someone for wanting the lowest rate possible, but you have to determine what rate works for you, wait for it and be prepared so when it comes around you can jump on it.

    I’ll definitely check our your site, thanks for commenting,

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About the HSH Blog's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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