Should You Lock When Mortgage Rates Go Higher?

Written by Posted On Thursday, 04 June 2015 10:00

For some homebuyers, the 4.00 percent 30-year fixed mortgage rate is a line in the sand they have no intention of crossing. As of June 2, 2015, some lenders are already charging 4.125 percent for a benchmark conventional 30-year fixed rate mortgage, according to Mortgage News Daily's Chief Operating Officer Matthew Graham.

Graham says that the higher rates are most readily explained by the domestic market's relationship with European markets where economic data and headlines concerning a potential Greek debt deal caused European rates to jump.

"The more it looks like Greece will get some sort of 'deal," says Graham, "the higher rates go in the stable countries, and it's those countries that have the most direct effect on US rates."

So where does that leave borrowers like you who are shopping for loans? It may seem counterintuitive, but you might consider locking in your rate before interest rates go any higher.

Locking a rate simply means that the lender will not raise or lower the rate during the lock period, so you're sort of betting that you'll save money. You can lock in a rate anytime once you've applied for a loan, but you have to be preapproved by the lender before you can lock in your rate.

According to, most lenders offer a loan lock period of 30, 45, 60 or 90 days. The longer the lock, the more you'll pay for the loan, so most people wait until they've put a home under contract before they lock their rate with the lender.

Most people would assume that the time to lock in a rate is when rates go lower, but in a market that is volatile, it's better to be safe than sorry. You won't know which way rates are really going to go.

Graham explains that's because some people believe we're in the midst of a race among world central banks to devalue currencies and lower interest rates. Others believe that the global economy is turning a corner and rates will grind higher.

That leaves you, the borrower, caught in the middle of fluctuating markets. The best thing you can do is talk to your lender and develop a strategy for your loan. A good lender will watch the market carefully, and try to get you the best rate possible.

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