Home buyers are often surprised when a "rate quote" from the morning won't be honored in the afternoon. Sometimes, the assumption is that the loan officer is just being sneaky.
This couldn't be less true.
Rate quotes change in the middle of the day because mortgage markets are in constant flux. All day, every day -- just like stocks.
And like stocks, a mortgage bond's morning price will likely "expire" before the day ends.
One way to visualize this is to look at today's Microsoft's stock price:
- At 9:30 A.M. ET, the price was $28.46
- At 9:38 A.M. ET, the price was $28.72
Over the course of 8 minutes, the stock rose by 26 cents and the "9:30 A.M. quote" was no longer available. For example, you couldn't call your stock broker at 9:38 A.M. and place an order for the 9:30 A.M. price because the price had changed.
Mortgage rates behave the same way.
Throughout 2008, mortgage rates have changed mid-day more frequently than in the past. On more than half the days, morning rate quotes were no longer valid in the afternoon. And, on at least 5 separate occasions, rates changed 4 times in just one day.
It's not typical, but it does happen.
So, if you're talking with your loan officer in the morning about a rate quote, be prepared to do all of your shopping in a compacted amount of time, and then be ready to make a decision.
By the time the afternoon rolls around, after all, that rate quote may well be expired.