A Common Tale
They explain that you can lock in your rate today so it won’t change, or you can float and take your chances on rates going lower.
You decide you don’t want to lock just yet because rates just seem to be moving lower and lower.
Then you wake up to stock rally after stock rally, which puts you in a good mood because your stocks aren’t bleeding losses anymore.
You decide it’s time to lock and call your lender to dial in that 3.375% rate on the 30-year fixed you were quoted last week.
No sense in taking any chances, right? It’s probably best not to get greedy and just go with 3.375%. It’s a very low rate and dreams of a sub-3% 30-year fixed-rate mortgage are probably just dreams and nothing more.
Here Comes a Surprise
The loan officer picks up the phone and you tell her you want to move ahead with what was quoted on Thursday.
Well guess what? Your low rate isn’t so low anymore. Yep. Rates went up since last week and because you chose not to lock, you’re now stuck with a higher rate.
No, the lender isn’t pulling a bait and switch, they aren’t playing any games. It’s just the market. Much like stocks and other securities, mortgage rates fluctuate daily with the market.
They can move up, down, or sideways on any given day. And when markets are active you better believe your unlocked mortgage rate will be too.
For much of 2016 until the last few trading sessions, the move was decidedly lower as global economic concerns stole the headlines.
But the last few days have been coming up roses for the stock market. As a result, mortgage rates have been rising. Unfortunately, not many folks like rising rates.
Those who locked last week are probably pretty happy seeing that they’ve now got what appears to be a below-market rate.
Conversely, the folks who speculated (yes, you’re a speculator if you float your rate) are kicking themselves for looking a gift horse in the mouth.
It’s Not Too Late to Get That Low Rate
The silver lining here is that it’s not too late to get the originally quoted rate. Just because mortgage rates are higher today doesn’t mean they won’t be lower tomorrow and the next day.
Ultimately, they can rise and fall just like the stock market and if you happen to time the market you can cash in with a low rate.
Many folks don’t see this latest stock market correction (in a positive sense) as a permanent one. Sure, the markets have rallied for a few days, but underlying issues haven’t changed much.
That could mean an end to this rally and a return to those lower rates you may have been quoted last week. The frustrating thing is rates often take longer to drop than they do to rise.
Lenders are happy to increase them if the economy is looking up, but cautious in lowering them in case they get caught out by another rally.
There’s also always a chance rates will continue to rise as more positive economic news surfaces. So today’s rates may not look too bad (in hindsight) if rates are even higher next week.
And you don’t want to get stuck playing the waiting game as your closing day inches nearer and nearer.
While you could have locked in 3.375% last week, and now 3.625% today, it’s still better than 3.875% tomorrow.