The Lock In Game
December 29, 2009 11:07 AM   Subscribe

Should I lock in interest rates now for a home mortgage or hope they dip soon? A complication to make this extra nailbiting. Mefites, I need your collective powers of forecasting....

About to purchase a home, but there may be some problem with repairs. I decided not to lock in the rate and float it for a few weeks, but am concerned about the recent rate jumps! Do I lock in now or should I wait until we are closer to the close of escrow (estimated to be a few weeks). The problem is that the inspectors found various problems and I don't know if they'll be fixed by close of escrow. Am concerned that I'll lose the money if we pay for the lock. Am also concerned rates might go down again, and we're locked into something higher. Any mefites have suggestions on what to do?

Interest rates have looked great...but they seem to be rising quickly. Does anyone know if there is any holiday related influence on this, and they might dip back down? Should we lock in and eat a possible fee that we might not have to pay?

Thanks for your collective wisdom.
posted by thisperon to Work & Money (11 answers total) 1 user marked this as a favorite
 
Mortgagenewsdaily and bankrate.com were the two sites I checked when we were going through this. We locked 90 days before closing (this summer). We may have gotten a .1 better rate if we had waited, but it was worth the less stress for me.

Your mortgage loan officer should be able to tell you what happens if you pay for the lock and then can't go ahead with the purchase.
posted by ejaned8 at 11:19 AM on December 29, 2009


I can't claim to be an interest rate wizard, but one thing to consider is the Federal Reserve's current stance of ending their support of the mortgage market via purchases of mortgage backed securities in 1Q '10:

To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.
posted by de void at 11:25 AM on December 29, 2009 [1 favorite]


Rates are trending up, with them being projected into the mid 6% range in the spring. Do you really have to pay for a lock? Try ABN Ambro. at www.mortgage.com
posted by Gungho at 11:26 AM on December 29, 2009


Mortgage rates, 1970-now
posted by tad at 12:09 PM on December 29, 2009


If it's only a few weeks I'd lock now. You don't need the stress and the difference will be minimal.

Seems suspicious that you'd have to pay for a lock.
posted by deanj at 1:36 PM on December 29, 2009


Interest rates will most assuredly be climbing next year. I wouldn't be surprised to see double digits in under five years.
posted by Civil_Disobedient at 1:55 PM on December 29, 2009


Response by poster: I think it is suspicious--but I've been told that this is what our lending
bank does in lieu of charging an origination fee (which some other lenders do.)

I have yet to find a lender who doesn't charge one of the following:

- lock fee
- origination fee
- or high admin/paperwork fee

I'll take a look at mortgage.com, thanks.
posted by thisperon at 2:33 PM on December 29, 2009


In Australia, interest rates, which have been set very expansionary, are fully expected by everybody to go up and only up for the next two years, towards neutral.

Nobody's predicting what happens after that.
posted by wilful at 2:47 PM on December 29, 2009


If any of us could predict mortgage rates, we'd be amazing, indeed. Rates are set by highly secret and complicated means. If you can afford the current rate, lock it in, and stop worrying.
posted by theora55 at 3:11 PM on December 29, 2009


I actually just talked to my lender about this not 45 minutes ago. My time frame is much shorter than yours, but he recommended just keeping an eye on the rates for the next couple of days. According to him, yesterday was the worst he'd seen in 60 days, and today they've dropped a bit, which I guess he expected.

I'm told that traditionally, rates go up in December and drop again in January, but since this is anything but a typical year, it's risky to bet on that happening now.

Don't listen to me though -- I've been agonizing over this for the last week, and I'm still not sure I'm doing the right thing.
posted by natabat at 3:46 PM on December 29, 2009


Lock it in now, the govt is keeping the rates low now to get us through the winter slump, and they'll raise them in time for the Spring bump.
posted by No New Diamonds Please at 11:19 PM on December 29, 2009


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