Current Mortgage Rates

Saturday, September 06, 2008



A lock failure is the inability or unwillingness of a lender to honor a mortgage price that a borrower had believed was guaranteed. The mortgage locks are so unreliable because of two reasons. One reason is that the adverse event that triggers the insurance - a rise in interest rates - affects every locked loan in lenders' pipelines. In contrast, the adverse event that triggers homeowner insurance is usually an isolated event. One house fire will not seriously damage a casualty insurance company, but a rise in interest rates can force a lender who is not adequately hedged into insolvency. Another weakness of the lock system is that some borrowers, especially among those refinancing, game the system. They lock the price with a lender, but if rates decline, they lock again with another lender. This practice raises the cost of locking, pushing lenders to find ways to protect themselves.

Some lenders try to protect themselves against this practice by charging a lock fee that is credited back to the borrower at closing but is not refundable if the borrower walks from the deal. Or the lender may insist that the borrower pay one or more fees, such as an appraisal fee, which the borrower would have to pay again if he went with another lender. These are fair conditions, but lenders who impose them place themselves at a competitive disadvantage, so they are far from universal.



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Current Mortgage Rates*

Loan Type
National Average
30-yr. fixed6.38%
30-yr. fixed jumbo7.00%
15-yr. fixed5.88%
15-yr. fixed jumbo6.50%
7/1 ARM6.25%
5/1 ARM6.00%
3/1 ARM5.88%
1-yr. ARM6.00%
1-yr. LIBOR ARM5.50%
10/1 ARM7.88%
*Mortgage Rates Updated: 09/04/2008