June 25, 2017 06:20 PM Eastern
Mortgage Rate Lock Recommendation
June 21, 2017 - Lock
Judging from early market trends, mortgage rates might edge upward today or maybe hold steady. However, those trends frequently change speed or direction during the day. So a sharper rise or a fall remain possible. Our prediction could be undermined in coming hours by economic, political, and geopolitical news that might affect the U.S. and global economies, including:
- Continuing concerns over oil prices, which were yesterday at their lowest in more than a year. A weekly report on the nation's inventories of oil from the Energy Information Administration is due at 10:30 am (ET) and could help or harm prices.
- Reaction to yesterday's U.S. House election in Georgia. Many investors will be relieved by the Republican victory because a loss might have derailed the President's pro-business agenda. They will be less happy about the narrowness of the win.
- This morning's economic data. Existing home sales in May beat expectations, providing some relief following recent disappointments.
If we were currently buying a home, we would lock our rate now, at least if we had to do so anyway during the next week or two. Read on to discover why you might prefer to float.
Average rates for 30-year fixed-rate mortgages edged down yesterday. They remain low by 2017 standards and could fall further but there is no guarantee of that. Indeed, bounces are common after lows and a new seven-month one was set last week. If you glance at the chart above, you will see a firm downward trend since March, However, as always, what happens next will depend on whether relevant news becomes more or less positive in coming days. Absent other factors, good news tends to push mortgage rates up, while bad news pulls them down.
Some experts would urge you to lock now, particularly if you are going to have to lock anyway within the next few weeks. Others might suggest you continue to float on the grounds that:
- There might be more political and economic turmoil ahead.
- Recent economic data have been insufficiently impressive to create an expectation of significant upward momentum.
- Most rate watchers seem to be predicting only small rises this year.
But neither group of experts has a crystal ball and there remains a real possibility of volatility. So, either way, you are taking a chance. Only you can decide on the level of risk with which you are comfortable.
"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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