Would you lock the Rate now if you have closing in next 6-7 weeks ?

Question

Hello everyone,

I would like to thanks and appreciate for going through my post.

SO, I  just signed contract for a house for an investment and however seller wants closing on May, 26 and we have more than 6 weeks left.

So I was thinking to lock the rate in the beginning of May.  However, my lender is offering me 6.375% for 30 years now and warned me that rate may not change or may go up in next few week.  I see today's mortgaged rate went up.

Should I wait until beginning of the may or lock the rate now,  Will the rate go down in April end or beginning of the may 2023.

Please advise.

Thanks

John Clarken · Answer

I think the safe bet is to lock it in. The question is it worth the risk for a possibly better rate with the chance of getting burned? In this market I would say the number you know is better for forecasting and planning then chancing. Ultimately it is what your risk tolerance is.

Eliott Elias · Answer

The short answer is, lock it in whenever you are most comfortable. No one will know what the rates will look like in the future.

Carlos Ptriawan · Answer

I am curious as well, why some lender can do several float down but there're few that's sticky with their original rate ?

Mohammed Rahman · Answer

Hey @Vik John - asking this question is like asking a magic 8 ball what to eat for dinner, it's all up to your personal preference! If people knew whether the rates were going to go up or down for sure, there would be a different market sentiment.

FYI the Fed raising their fed funds rate doesn't necessarily mean that mortgage rates will go up. Mortgage rates are affected by a lot of different factors including fed funds rate, bond market, overall economic outlook, etc.

Fed funds rate can increase and mortgage rates can decrease at the same time.

Dave Skow · Answer

@Carlos Ptriawan- thanks - the  lenders  that do offer  float down options  either make the  process  difficult to  actual  use with the  criteria they set so they can  avoid  doing it  and   the lenders that  do offer an easy float down  likely have a  big  avenue of investors  that  can be  utlized ....Lenders are very  cognizant that  if the  market  plummes  quickly - the lender better  get  creative in order to protect their locked  pipeline  ( as  borrowers  often  will bail from a  lender to go to another lender if the rates  cant be  adjusted )

Dave Skow · Answer

@Vik John- thanks .....Lock now and move  on your next tasks  ...depending on the loan amt size , trying to time a dip in rates  really  isnt a big deal ...eg...150K loan at 6.375%  has a Prin and int payment of $936 and for a  6.25% rate this drops to $624  ( 12 per month  difference ) ..this rate is  good for a  30 yr fixed rate  rental  loan ....what is the LTV and the  loan fee/ points tied to this rate ?...you might also  ask your lender  if they can offer a  float down option on the rate  lock in case  rates plummet in the  next  4-5 weeks  ( unlikely to occur  but you never know - good luck

Carlos Ptriawan · Answer

Not sure about the other market, but just little bit of interest rate easing is making our local market going up by 10%, and that's equal to losing 100k in just one month.

I guess the interest rate doesn't really matter at all in certain location, just buy buy buy and waive all contingency, think about refi later on. This market is unstoppable.

Carlos Ptriawan · Answer

You lock the rate when TLT is reaching new high 1 month.When I submit the application, my application was having 5.65% 10Y ARM.Then I see the  SVB debacle, TLT is going up nicely, ARM went to 4.99 !!!! I locked 4.99 :-)Now I see 5.5 again , I guess getting used to trading bond is making me convenient when to lock rate as well.

Sasha Mohammed · Answer

I vote lock. this market is just so volatile, and personally I don't like to gamble with my client's success.

It's true none of us have a crystal ball, but we do all have opinions on what we think the market will do, and the consensus (still an opinion) is that we will see lower rates down the road. whether that will come later this year, early next year, or not for another 2-3 years is still up in the air.

Point is, "if you like it, lock it" and you can explore refinance opportunities once they arrive.

Just my two cents. Take it with a grain of salt.

Jim Blackburn · Answer

Yes I believe rates are going up 25 bps once or twice more before end of year based on the feds plan to control inflation.

I do understand that a 90 day lock is often times significantly higher priced than a 30 day lock depending on the investor lender. However, the higher cost will compensate for the protection and peace of mind having the rate secured now while knowing the probability is higher that rates will go up than it is they go down.

At some point, the 30 fixed consumer mortgage rate for primary residence will come back down to 5.5% range (perhaps within 6-18 months), followed by further reduction down to 4.5% 12-18 months after that).....Yeah, so 6-36 month horizon from today.    But not yet... JP is still fighting inflation and must stay the course to avoid the entire fed committee looking like fools by yoyoing the rate up and down in such a short period of time...

Would you lock the Rate now if you have closing in next 6-7 weeks ?

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