April 25, 2017 08:20 AM Eastern
Mortgage Rate Lock Recommendation
April 24, 2017 - Lock
It is looking as if mortgage rates might rise today, possibly significantly. However, that prediction is based on early market trends, and those frequently change speed or direction during the day – as they did very slightly on Friday. So a holding steady or fall both remain possible. Meanwhile, that forecast could be disrupted later by many factors, including reaction to:
- Yesterday's first-round vote in the French presidential election, which reassured global investors and is probably the main cause of today's likely rise.
- The fact no agreement has yet been reached to avert a shutdown of the Federal government starting Friday. If later today a shutdown becomes significantly more likely, that could conceivably reverse the morning trend and see mortgage rates fall.
- A couple of speeches later by Minneapolis Federal Reserve Bank President Neel Kashkari.
- Political and geopolitical news that might affect the U.S. and global economies.
Still, if we were currently buying a home, we'd lock our rate now, certainly if we had to lock anyway within the next couple of weeks. Read on to find out why you may prefer to continue to float.
Average rates for 30-year fixed-rate mortgages inched up for a third successive day on Friday, but remain near their lowest level since mid-November. It is much too soon to assume the falls that have dominated recently have come to an end: If you add up all last week's changes, they together come to only the smallest measurable rise. What happens next depends on whether economic, political, and geopolitical news becomes more or less positive in the near future. Absent other factors, good news tends to push mortgage rates up.
That uncertainty is why many observers would urge you to lock your rate the next time a significant rate rise looks likely (today!), in case that heralds a resumption of the overall upward trend that has dominated since early November. But falls over the last month or so might encourage you to carry on floating in the hope a sustained downward trend will further solidify in coming days and weeks. The latter might well turn out to be the case. But it is still a risky bet – as a glance at the Mortgage Rate Trends chart above might suggest. Are you a gambler?
"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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