Should Home Buyers Lock in Rates?

Should home buyers apply for loan lock-in rates that are at their highest level since February? Or should they bet that the federal government will find a way to lower rates?

Money magazine staffers say the wildcard is Federal Reserve Chair Ben Bernanke. The Fed has been buying up long-term Treasuries and mortgage-backed securities to keep rates low. But when rates started to climb in the last week, the Fed seemed to signal that it wasn’t too concerned.

But now that rates have climbed to a six-month high, some observers believe that the Fed will refocus its efforts and push them down.

“It’s one thing to have a Treasury yield backup when mortgage rates are still declining, but that is no longer the case. The yield on the 30-year fixed-rate is already up 20 basis points from the lows; 1-year ARMs have jumped 17 basis points. This is not what the Fed wants to see,” says David Rosenberg, a former Merrill Lynch economist now at Gluskin Sheff.

Source: CNNMoney.com, Carla Fried (05/29/2009)