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Lock Now Or Wait For Rates To Go Lower?
Below is my commentary on MortgageNewsDaily today about the rate lock conundrum in a declining but very volatile rate environment.
To this I’d just add that if rates drop after you lock a loan, the locked rate isn’t just lowered to current market. All lenders have renegotiation policies and the gist of all policies is that locked borrowers can usually capture about half of a rate drop—so if rates dropped .25% after you locked, lenders may allow you to renegotiate to lower your locked rate by .125%. These renegotiations are specific to each lender’s rules and based on each client’s borrower and property profile.
A reminder today that Spain and other eurozone countries are still in a dire state caused European bonds to sell off and U.S. mortgage bonds to rally. Rates drop when bond prices rise like this. These are the blips that make the “should I lock or wait for lower rates?” question so hard to answer. My summary a couple days ago encapsulates the way we’re working with clients to manage this volatility.
“Locking purchases as they ratify to capture current lows for clients whose purchase contracts dictate a specific timeline. Decisions to lock refis are specific to each client. If they’ve recently closed a purchase or previous refi (thus rate is only slightly higher than current market), it’s either a float or a no-cost refi depending on breakeven math for closing fees spent previously. If they haven’t refinanced in awhile (thus rate is much higher than current market), it’s a lock—whether those locks are cost or no-cost also depends on math best suited to client profile and expected time horizon in the loan and/or home.”
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Reference:
- This is why Europe is getting crushed today (BusinessInsider)
- Why Locking A Rate Is Like Buying A Stock (TheBasisPoint)
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