Mortgage Rates Finally Balancing Out…Should You Lock In?

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Things may finally be balancing out in the mortgage market, as rates stayed level for consecutive days—an event that may indicate a move toward higher rates to come. That said, “steady as she goes” is still close to historically low levels: The current average for a 30-year fixed-rate loan is 3.375 percent…a mere 6.5 percent away from the all-time low, set during 2012. We (boldly) predicted a few weeks ago that the rates would ultimately fall below that mark in the wake of the Brexit decision.

“Mortgage rates right now should be at least 3.25 percent, if not lower,” said Guy Cecala, publisher of trade publication Inside Mortgage Finance, at the time.

Now predictions are a tad more conservative. Ted Rood, a senior originator at MB Financial Bank, predicts that some more dramatic financial news will need to break before the rates spike—either upward or downward.

“Bond prices were nearly unchanged today, and my rate sheets improved slightly compared with yesterday’s,” he said. “The markets appear to be lacking motivation now, we need some global economic drama to drop rates. Of course, just because we need it doesn’t mean we’ll get it. Given pricing is still near multi-year lows, there’s nothing wrong with locking early in the process now, especially if your debt ratios or cash to close is tight. Most of my pipeline is locked.”

So that’s about the summation of things. There are two options for those in the homebuying market, depending on what kind of a gambler you are: A) Lock in now and be guaranteed a rate that, frankly, nearly every generation of homebuyer in American history would be jealous of. Or B) hold out for the better deal. It’s a distinct possibility that rates could continue to drop…but realize that the chance is just as distinct that they might rebound upward, leaving you to mourn what could have been.

That said, if things spike to 3.5 percent in the next few weeks, you’re still in a much better position than you would have been at this point last year (4.04 percent).

If you’re still on the fence, consider the two standards offered by Matthew Graham of Mortgage News Daily: Time Horizon and Risk Tolerance. First, determine how long you can afford to wait (“afford” in terms of time…as in “my lease is up in two weeks, I should probably really work on this now”). Then decide a clear boundary for how high you’re willing to allow rates to rise before you call “chicken.” Maybe you want to lock in at 3.5 percent before it gets higher, or maybe you’re still willing to bet that it’ll come back down after that point.

As always, stay vigilant!