Long Beach mortgage rates are behaving exactly as I expected they would when I reissued my lock recommendation on May 29, 2008.  What then for June, 2008 mortgage rates? 

Expect more volatility.  The Fed's in a weird spot.  The economy is tanking under the pressure of high gas prices and the real estate recession.  The tax rebates are mailed and that money's been spent.  Gasoline is at $4.00/gallon.  Food costs are spiraling from the dumb ethanol energy policy. Ben Bernanke doesn't know if he should be fighting inflation on Monday or preventing a depression on Tuesday.  His mixed signals are being perceived as a potential rate hike which has kept Long Beach mortgage rates above 6% these past two weeks.

A thirty-year fixed rate loan is at 6.375% now.  The 5/1 ARM I loved so much at 5.375% has risen to 5.5%.  I'm not certain that we'll see those rates come down this month.  If you have a June or early July closing, lock your mortgage rate now.  I do, however see the weak economy outweighing the inflationary fear.  The Saudis are attempting to increase production which leads me to believe that they think the bull market in oil is over.  If you have a closing in July, or are considering a refinance, I think you can float your rate until mortgage rates drop below 6%. 

If you're thinking of refinancing, it makes complete sense to start the process now by applying for a home loan.  I expect credit guidelines to tighten throughout the summer.  While I think you can hold off on your mortgage rate lock, you should get the documentation in so that the loan can be underwritten in June.  Loan approvals are usually good for 60 days so you can lock and close when rates come back down.

In summary: Lock all loans closing within 30 days, float the rest.

PS:  This could change daily.  Market volatility is such that I could move to an "all float" recommendation if the reaction to the Saudis summit is positive.  If oil gets down below $120/barrel, The Fed won't worry so much about inflation.  As always, keep checking back or subscribe to my RSS feed.

Lock all mortgage rates immediately.  This is a stagflation fear we're seeing:

The central bank can't be "complacent about inflation," Janet Yellen, president of the Fed Bank of San Francisco, said in a speech yesterday. Recent measures of consumers' outlook for prices "highlight the risk that our attempts to deal with problems in the real economy could lead to higher inflation expectations and an erosion of our credibility," she said.   

Yellen also said she anticipates inflation will slow as the labor market weakens and "commodity prices level off," echoing comments by other policy makers.   

Investors project the Fed will keep the benchmark interest rate unchanged at its next meeting on June 25. That would be the first pause since the central bank started cutting rates in September.           

Rising prices from overseas, reflecting the drop in the dollar, are another source of concern. U.S. businesses have leeway to boost prices as companies abroad charge more.

The mortgage markets will overreact for the next 5-10 days.  Long Beach mortgage rates should shoot up quickly.