Mortgage-rate party may have reached the end
By Michael D. Larson • Bankrate.com

You know how there are certain seminal moments in time? Those days when empires fall? When great turning points in history occur? When people stop dancing to disco and start crushing their Bee Gees records in the middle of baseball stadiums?

For mortgage hunters, that day may have come March 27. Bond yields skyrocketed and mortgage rates followed because the single most important economic indicator of late -- consumer confidence -- rebounded sharply this month. It's too early to say whether rates have hit an absolute bottom for this latest interest rate cycle. But now more than ever, borrowers have to consider whether they could live with themselves if they missed really good rates waiting for great rates that never came.

Why are the latest figures so important? During a February speech, Federal Reserve Board Chairman Alan Greenspan said the level of consumer confidence over the next few months could determine whether the economy continues to get worse or bottoms out quickly and then improves.

If consumers remain confident in their financial future and keep spending, factories will ramp up production again, layoffs will trail off and the second half of the year will look much better than the first. If they start hunkering down, the current downturn could turn into a recession. Because the big man in Washington said publicly that he cares so much about confidence, Wall Street traders have watched each report that measures it like a hawk.

They receive two major studies each month, one from the University of Michigan and one from the New York-based research group, The Conference Board. The Michigan study registered only a slight uptick in consumer sentiment -- to 91.8 in March from 90.6 a month earlier, according to Briefing.com. But the Conference Board's Consumer Confidence Index shot up to 117 from 109.2. That dramatic and unexpected hike, while good news for the economy, pummeled the bond market and sent interest rates soaring.

Is there a chance this is much ado about nothing? Maybe. If layoffs keep mounting and stocks continue to dive from already depressed levels, confidence could fall again. But if the stock market's late-March mayhem didn't damage confidence levels, nor keep people from buying big-ticket items such as houses, who's to say further declines will have a big, long-term impact?

Consider also that the main thing keeping mortgage rates low lately is the stock market's problems. Nobody -- not me, not you, not Alan Greenspan -- knows whether the market is going to rise or fall on any given day or week. Without data showing the economy getting worse (rather than just bouncing around at a low level the way the latest numbers show), you're essentially gambling when you wait to lock in a low rate that you'll get a big down day in the market.

If that happens, great. You might shave one-eighth of a percentage point off your mortgage rate. But is it really worth all the stress involved in watching every 5-point rise or fall in the Dow Jones Industrial Average, or the risk that one down-100 day will be followed by three up-200 ones?

The point here is this: there's no telling for sure if the almost one-year downward trend in mortgage rates has come to end. But the odds of that being the case increased substantially with the improved confidence figures. Rates should hold steady until more solid evidence of an economic recovery emerges, but when the market sees that, rates will start rising again. Do you want to be one of the people left behind?