No need to obsess about mortgage rates
By Michael D. Larson • Bankrate.com

Down 19 points one week. Up 12 points the next. The mortgage rate chart has looked like something you might see on an "ER" EKG machine lately.

Unfortunately, many borrowers are letting their heart rates jump around unnecessarily too. They're either fruitlessly waiting to lock in on the expectation that 6.5 percent, 30-year rates will return or panicking because rates moved an eighth of a percentage point higher when they weren't looking.

In the interest of keeping emergency room visits down, I'm going to offer this word of advice: Stop obsessing about mortgage rates so much! Even though they've been bouncing around a lot day to day, they haven't really changed all year and probably won't for the next few months.

Indeed, 30-year fixed rates haven't risen more than 35 basis points above 7 percent, nor dropped more than 10 points below that mark, in all of 2001. Lock in on one of the weekly dips, hop into the Family Truckster and go to the beach already.

"My take on it would be to make whatever financial moves need to be made at this time," says Gary Jones, president of GJones Financial Group Inc., an Asheville, N.C., mortgage brokerage.

"The way the Feds are, rates could be back up tomorrow. They're all over the board."

Why the confusion? People don't seem to understand that the U.S. economy is in a trough right now. Some say the sky is falling, massive recession is right around the corner and (as one e-mailer actually wrote me in April) mortgage rates will hit 4 percent over the next year.

Others say a snapback rally in the stock market, interest rates and the economy is right around the corner because of the Federal Reserve Board's aggressive rate cuts.

The truth, in my humble opinion, lies somewhere in between. Yes, unemployment will likely continue to rise as the year progresses, and companies will continue to be cautious with travel and discretionary spending. That will put a small damper on the home purchase market and keep consumers slightly on edge.

But at the same time, recent reports show consumers aren't putting spending completely on hold. That means many manufacturers will start boosting production and stop firing people in the months ahead.

No matter what some doubting Thomases may say, lower interest rates will entice many consumers to boost spending in the months ahead too. Tens of thousands of borrowers have been able to lower their monthly debt burdens by refinancing mortgages this year, for example.

And with rates on everything from auto loans to home equity lines of credit still falling, many more will refinance car loans and consolidate high-interest credit card debt. That will free up tens or even hundreds of dollars a month per household in new spending power, which should be further bolstered by tax rebates this summer.

This backdrop provides a recipe for stable mortgage rates over the next several weeks. There will certainly be short-term fluctuations as various economic reports alternatively make the "doom-and-gloom" and "peachy-keen" scenarios look more likely.

But mortgage hunters shouldn't let their pulses quicken too much. Consider just locking in on one of the short-term dips, pouring a margarita and enjoying the summer-like heat.