The Best Time to Lock your Mortgage Rate

Of the questions loan officers receive the most, “should we lock?” is among the most common. And a good loan officer should always have one eye on the mortgage-backed securities (MBS) market so that they can give a thoughtful answer in that moment. While trends associated with major rate drivers (like the Fed Funds Overnight Rate) can and do occur over periods of time, rates continue to rise and fall during those periods on the basis of MBS trading activity. For this reason, there is one good time to lock your mortgage.

The time to lock a mortgage rate is when you know the next rate change will be upward.

Because at any given time, the next rate change might be downward and a well-informed advisor can help you save a few bucks while eliminating the risk of your rate going up. It may seem like gambling, but it mostly isn’t. How?

Easy – we have spies. The less fun way to describe them would be expert analysts and thought leaders who watch the MBS market and its external predictors of rate increases. Their alerts and market analysis are a costly expense for us but also a very critical element of our advisory that allows us to confidently float your rate until we are certain it should be locked. Any quality mortgage advisor you use should be able to do the same.

PS: The catch with your “guaranteed” rate.

There is only way for a lender to “guarantee” your rate for months down the road – by loading up a ton of fees so that they know they are making money even if the market swings wildly. Don’t be fooled, there are plenty of independent brokers that will compete for your business without the gimmicky promises that you wind up paying for.

Rate locks have a cost, even if you don’t see it.

When we lock a rate with a lender, the lender then sets aside those dollars to fund your mortgage on the basis of current MBS market conditions. When locked loans don’t close, those funds that were reserved represent a missed opportunity for the lender and as a result, a lender can downgrade a broker’s pricing and/or priority status which in turn will affect the competitiveness and quality of service that broker is able to offer.