April 1, 2015 08:07 PM Eastern
Mortgage Rate Lock Recommendation
March 25, 2015
Lock if closing in 7 days:Rates are down
Lock if closing in 15 days:Rates are down
Lock if closing in 30 days:Rates are down
Float if closing in 45 days:Rates are up
Float if closing in 60 days:Rates are up
Interest rates this morning have already improved, gotten worse, and improved again. Yields on ten-year Treasury Notes have settled in at 1.88 percent, well below the benchmark 2.0 percent mark, and the Dow is down over 200 points. There should be a small improvement in this morning's mortgage rates; closing costs should be about .125 percent lower, saving $125 for every $100,000 financed. It would also not be surprising to see mortgage improve a bit more if this morning's trend continues.
February's Durable Goods Orders report from the Commerce Department revealed a 1.4 percent drop in new orders for big-ticket products. Because analysts had predicted a small increase, this report was favorable for bond rates and mortgage pricing. It's not one of the more heavily-weighted reports, however, and it's known to be fairly volatile, so its impact was not overwhelming.
The first of two Treasury auctions takes place today, and its results will be posted early this afternoon EDT. The results could change the direction in which mortgage rates are trending; if demand is strong, it could push rates solidly lower, while a lackluster performance might push rates up this afternoon.
Today's auction consists of five-year Notes and tomorrow's will feature seven-year Notes. If demand is weak, there is likely to be broader selling in the bond and mortgage-backed securities (MBS) markets and repricing for worse by mortgage lenders. However, robust demand for bonds usually makes MBS more attractive to investors and pulls mortgage rates lower.
In addition to a Treasury auction, tomorrow brings the usual weekly unemployment figures. Being weekly numbers, their influence is limited. Analysts expect that 290,000 new claims for unemployment benefits were filed last week. More than that would be good for rates, and smaller numbers can push rates up.
"Locking" your mortgage means that you and your lender have agreed on an interest rate and price for your home loan. Once your loan is locked, that's the rate and price you get, regardless of what happens in the financial markets. If rates go up, you're protected but if rates go down, you won't benefit either -- you close your loan at the rate you've locked and you can’t change it. Locks have expiration dates ranging from 30 to 60 days or more, and the longer your lock period, the more it costs. If you don't close your loan on time, you could end up paying a higher interest rate.
You can lock in your loan at any time during the process. Until you lock your interest rate, you are said to be "floating" your mortgage. The only rule is that you have to lock in before you can close on your purchase or refinance.
The decision to lock or float your loan can have a long term impact so it’s important you make the right choice. That’s why we offer a quick rundown of the key factors that drive mortgage rates today and everything you need to know.
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