Consumer borrowing costs inched lower yesterday. Consumer borrowing costs inched higher today.

The best par 30 year fixed mortgage rates remain in the 4.00% to 4.25% range, for well qualified consumers.  Rates below 4.00% are available but the closing costs/points structure is only advantageous to borrowers who intend to keep their mortgage for at least the next 5 years, otherwise paying points to float down your note rate is not worth the additional closing costs (ask your loan officer for a breakeven analysis). If you're seeking a shorter term mortgage loan, the best par 15 year rates are in the  3.375% to 3.625% range.

Mortgage Rate Disclaimer : Loan originators will only be able to offer the lowest conventional and government (FHA/VA) mortgage rates if the terms of your loan do not trigger  risk-based loan level pricing adjustments (LLPAs). If you do not fall into the "perfect borrower" category make sure you ask your loan originator for an explanation of the characteristics that make your loan a riskier investment. (eg. credit scores under 720 and investment properties)

With exception to a few periods of  increased lender competitiveness in the past two months, the best 30 year fixed mortgage rates have generally held steady in a range between  4.00% and 4.25%. 

Yesterday a reader posed the following question:

"A lot of the technicalities of what causes mortgage rates to go up and down are way past me... in the past couple of weeks mortgage rates have gone down and up. I am curious what mortgage rates are expected to do in the next week or so? I am going to start the process of closing on a house in the next week or so... I am curious if there is a good day to lock in at? and what is being anticipated in regard to rates?"

My answer: I would wait to see if borrowing costs continue to improve because mortgage could rates move below 4.00% again in the next 7-10 days.  If the recent rally fails to extend itself and your closing costs begin to rise, you should lock.  Any rate at or below 4.25% is a success.

The "recent rally" I mentioned yesterday failed to extend itself today.  The bond market has displayed a clear unwillingness to push interest rates lower without hearing new guidance from the Federal Reserve regarding Quantitative Easing.

This post shares background on Quantitative Easing: Mortgage Rates in Limbo. Waiting on Quantitative Easing

That said, if you're getting closer to your closing date and need to lock in the terms of your loan before the November 3rd FOMC meeting, you have likely seen rates go as low as they're gonna go. At this point the lock/float decision is starting to split  hairs. The current mortgage rate/closing cost structure is extremely aggressive. It's time to lock in the terms of your loan. 

If you have more time to float, on November 3, 2010 I anticipate the Federal Reserve will announce another Quantitative Easing program. This event is expected to lead consumer borrowing costs back down to recent record lows, which means we should see mortgage rates dip below 4.00% with much more attractive float down structures (in terms of how long it will take to recover points paid at closing).

Do I think mortgage rates will go lower than 3.75% if the Fed announces QEII?

No. No I do not. It's possible we'll hear scattered reports of lenders quoting rates as low as 3.50% but those offers will be phantom (nearly impossible to land) and the closing cost structure will not be float down friendly to consumers.

WARNING: If the Fed does not announce QEII on November 3, 2010, there is a significant risk of mortgage rates rising. I think QEII is coming though....