Good news for prospective home buyers: You can find 30-year mortgages for less than 5% again. But those rates may not last . And these days it’s almost
impossible to lock in a rate while you hunt for a home. Banks—for understandable reasons—now want to evaluate a property before pre-approving borrowers.Mortgage rates have been falling in concert with sinking interest rates on long-term Treasury bonds. The two are closely related, through a complex mechanism involving mortgage-based securities. And if mortgage rates start rocketing again in the next few months, a rebound in long-term Treasury yields will likely be the cause.People who worry that rates will spike again before they find a home can protect themselves by investing in a mutual fund that tracks long-term interest rates. Or they can buy call options on one of those funds instead. If Treasury rates suddenly skyrocket, you may make back what you would lose on the mortgage rates.This may sound like some incredibly complex footwork, and most people will shy away from trying these moves. But considering the cost of even a slight rate change over the life of a mortgage, they’re worth considering.
By Brett Arends, Sept. 30, 2009 WSJ

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