Mortgage Rate Lock Recommendation
August 22, 2017 - Lock
Mortgage rates might edge upward today, or maybe hold steady. However, that forecast is based on early market trends, and those frequently change speed or direction during the day. So a sharper rise or even a fall remain possible. Still, if we were currently buying a home, we would lock our rate now, certainly if we had to lock anyway anytime soon. To discover why you might prefer to float, read on.
Our prediction could be undermined in coming hours by any economic, political, and geopolitical news that might affect the American and global economies, including a U.S. Treasury auction of short-term bills at 1:00 pm (ET). In a quiet start to the week, there is little else of significance on the economic calendar for today, although investors may jockey for position ahead of the Kansas City Federal Reserve Bank's annual Economic Policy Symposium on Thursday in Jackson Hole, Wyoming.
Average rates for 30-year fixed-rate mortgages held steady yesterday, remaining at the 2017 low set on Friday. 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. However, that simple correlation is far from rigid, at least over the short term.
Some experts might urge you to lock your rate the next time an appreciable rise looks likely, 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. But neither group 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.