May 24, 2017 11:08 PM Eastern
Mortgage Rate Lock Recommendation
May 24, 2017 - Float
Mortgage rates might hold steady today, or perhaps just inch either side of the neutral line. However, that forecast is based on early market trends and those frequently change speed or direction during the day. So a bigger fall or rise remains possible. Meanwhile, the prediction could be undermined in coming hours by many factors, including:
- The release at 2:00 pm (ET) of the minutes of the last meeting of the Federal Reserve committee that determines many interest rates. That's the thing most on markets' minds at the time of writing.
- The news overnight that Moody's has cut China's credit rating.
- Further reaction to this morning's economic data. Existing home sales were disappointing.
- Speeches by two senior Federal Reserve officers.
- Any continuing fallout from the White House's woes. These have played a significant part in some of the recent falls in mortgage rates. However, the President's absence on a foreign trip might dampen down hysteria within the beltway.
- Two U.S. Treasury auctions of notes.
- Other economic, political, and geopolitical news that might affect the U.S. and global economies.
If we were currently buying a home, we'd float our rate now and revisit that decision tomorrow morning. Read on to discover why you might prefer to lock.
Average rates for 30-year fixed-rate mortgages dipped to their lowest level in seven months in the middle of last week. They edged up on Friday and Monday, and held steady yesterday. There could be more falls to come but there is no guarantee of that and rises remain a real possibility. As ever, what happens next will depend on whether economic, political, and geopolitical 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're going to have to lock anyway within the next month. Others might suggest you continue to float on the grounds that:
- There might be more political turmoil ahead.
- Recent economic data have been insufficiently impressive to create an expectation of significant upward momentum.
But neither group of experts has a crystal ball and there remains a real chance 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.
Recent Mortgage Rate Articles
Recommended Mortgage Rate Articles