July 27, 2017 12:27 AM Eastern
Mortgage Rate Lock Recommendation
July 26, 2017 - Float
Judging from early market trends, it is looking as if mortgage rates might hold steady today, or perhaps just edge either side of the neutral line. However, those trends frequently change speed or direction during the day. So a sharper rise or fall remains possible. Our prediction could be undermined in coming hours by economic, political, and geopolitical news that might affect the American and global economies, including:
- Publication at 2:00 pm (ET) of a report of yesterday's and today's meeting of the Federal Reserve committee that determines many interest rates. While few expect a rate-hike announcement, investors and traders pay close attention to these events.
- This morning's domestic economic data – Sales of new homes in June were very close to expectations.
- The U.S. Treasury will be auctioning two lots of notes.
- Markets will keep a close eye on events on Capitol Hill, as the U.S. Senate debates health care reform. To some, the credibility of President Trump's wider business and tax agenda is at stake.
If we were currently buying a home, we would 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 rose sharply yesterday, wiping out many of the gains seen over the last week. They are now back close to where they were between July 12-18. Rates could fall again but there is no guarantee of that. What happens next will depend on whether relevant news becomes more or less positive in coming hours and days. Absent other factors, good news tends to push mortgage rates up, while bad news usually pulls them down.
Many experts would urge you to lock now, particularly if you need to lock anyway within the next few weeks. Others might suggest you continue to float, providing you have time to ride out the coming near-inevitable ups and downs. They perceive June's and early July's rises as having mainly been the results of technical stimuli rather than firm evidence of improving health in the underlying U.S. economy. But neither group of experts has a crystal ball and there remains a real possibility of continuing 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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