Loan Locks and Mortgage Rate Trends

Before locking in a home loan, it's wise to understand the general trend of current mortgage rates. Such knowledge improves your chance of getting the best or lowest rate at today's going prices.

After the original mortgage application is made and accepted, but before the mortgage closes, lenders ask their customers to pick an interest rate and commit to it in writing. If daily rates are trending higher, procrastination can be costly, because today's highest rate might turn out to be next month's lowest available rate. Similarly, when rates are in a downward trajectory, it's possible to lock in a daily rate that turns out to be higher than what would have been available by taking a "wait and see" approach.

Best mortgage rate search

Locking in a mortgage rate in order to snag the lowest price can be a difficult process for many homeowners. In fact, it even presents challenges for professional loan brokers, because predicting mortgage trends is not an exact science. While it's not unheard of for a consumer to pore over daily mortgage interest reports and digest all sorts of technical, economic, and political data to guess the direction of rates, the truth is that mortgage trends are hard to pinpoint. But they're not always so hard to generalize. Consulting a knowledgeable loan officer is generally all it takes to make the best possible decision based on the information at hand.

Long-term perspective

Instead of focusing solely on today's rates, think long range to gain a better perspective. Otherwise, paying a tiny fraction of a point extra can leave you feeling like a loser when, in fact, you may have locked in a rate that's still low enough to reward you with major savings over time. That's because most broad-based mortgage rate trends last for years, not days.  If you plan to keep your mortgage for more than three to five years, it's best to focus on the longer curve ahead, not on the relatively insignificant bumps in the road that might rise or fall on a daily basis.

When it comes to stocks, it's rarely possible to buy at the lowest price or sell at the peak.  The same theory applies to mortgage rates. Interest rate trends are fluid and move up and down on a monthly, weekly, and daily basis. The best thing to do is to have your loan officer advise you of the current trend and lock the best rate based on that information.

The Fed is currently keeping interest rates steady, and there are strong indications that rates will soon start to climb.  Most experts believe that rates will start to trend higher within the coming months. Lock in a decent rate today, and maybe it will drop a little before your closing. But don't be disappointed. Within a few years, today's historically low rates will probably look like bargains that won't be offered again for a long time to come.