Confused by mortgage rates? Here's what you need to know.

Experts advise you to grab a rate that suits your needs. Don't wait for a lower one.

BY DINA ELBOGHDADY - THE WASHINGTON POST

Published: 09/21/08


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Just about anyone who cares knows that interest rates on a 30-year, fixed-rate mortgage have dropped recently.

But by the time you figure out what that means for you, it could all change.

With the world's financial markets in uncharted territory, trying to get a handle on what's likely to happen to mortgage rates has become more baffling than usual.

The rates on plain vanilla 30-year, fixed-rate loans tumbled after the government seized control of mortgage financiers Fannie Mae and Freddie Mac on Sept. 8. The following week, loan applications from borrowers eager to refinance shot up 88 percent, while those from people looking to buy a home went up 5 percent, according to the Mortgage Bankers Association.

But when the global financial markets went haywire in the middle of this week, that havoc translated into a quick spike in mortgage rates. Still, the average rate fell for the fifth consecutive week, to 5.78 percent, from 5.93 percent the previous week and 6.34 percent a year ago, according to a Freddie Mac survey.

The bottom line, echoed by many consumer advocates, is that if you're shopping around for a loan and you find a rate that works for you, grab it.

Do not risk a botched deal by waiting for a lower rate, said Keith Gumbinger, a vice president at research firm HSH Associates. "In these highly volatile market conditions, your opportunity to get that deal completed may be fleeting," Gumbinger said.

Financial advisers also say you can try to lock in your rate, if you think rates will rise, but that you might have to pay additional charges.

Some lenders will offer a "float down" option that allows your to renegotiate if rates drop, but that could come with fees too.

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