Should I lock in my mortgage rate today or wait?
Locking in early can help you get what you were budgeting for from the start. As long as you close before your rate lock expires, any increase in rates won't affect you. The ideal time to lock your mortgage rate is when interest rates are at their lowest, but this is hard to predict — even for the experts.
History shows that Monday is the calmest day for mortgages. It's because there isn't as much news reported about the markets at the beginning of the week compared to the end of the week. Aiming to lock-in your mortgage rate on a Monday is your best bet to get a calm rate compared to other days of the week.
If you don't lock in your interest rate, rising interest rates could force you to make a higher down payment or pay points on your closing agreement. When you pay an up-front fee—or mortgage points—to a lender, you're providing more money initially in order to get a lower interest rate.
It's impossible for anyone to know what the future holds, so the decision whether you should fix your mortgage now or wait really depends on what you personally think is going to happen to rates in coming months, and whether you need the absolute budgeting certainty that a fixed rate provides or not.
If interest rates go up after you've locked in your rate, you get to keep the lower rate. On the other hand, if you lock your rate and interest rates fall, you can't take advantage of the lower rate unless your rate lock includes a float-down option.
If you're switching because interest rates have dropped, you don't have to worry about this. But in other scenarios, if you've locked in a rate with your current lender, the new lender isn't bound by that agreement, which could result in a higher interest rate.
While there's some dispute on exactly how much rates will decrease, the general consensus is that mortgage rates will go down in 2024, and they could even end up close to 6% by the end of the year.
A downside, for the borrower, is a mortgage rate lock would prevent them from taking advantage of lower rates that may occur during the lock period.
Until inflation slows and the Fed is able to start lowering the federal funds rate, mortgage rates are expected to remain elevated. Most major forecasts believe that mortgage rates will ultimately trend down this year. Fannie Mae researchers recently predicted that rates would reach 6.4% by the end of 2024.
Longer commitment: A five-year fixed rate mortgage is a longer-term commitment, which means that you're locked in to the mortgage rate for a longer period of time. If you anticipate that you might want to move or refinance your mortgage within the next five years, a shorter-term mortgage may be a better option.
Should I fix my mortgage now in 2024?
Forecasters believe mortgage rates may fall further in 2024, meaning it may be wise to opt for a variable rate or tracker mortgage for the time being, and fixing your mortgage once rates do slide. For a more accurate steer, it's a good idea to engage a mortgage advisor when you're ready to choose a mortgage.
You can arrange a new deal 6 months before your current one expires. Therefore, it's worth doing that now as mortgage rates are coming down. If they reduce even further, you can always change your mind and opt for a better deal instead. It's not recommended to just leave your fixed-rate deal to expire.
Studies have found that over time, the borrower is likely to pay less interest overall with a variable rate loan versus a fixed-rate loan. However, historical trends aren't necessarily indicative of future performance. The borrower must also consider the amortization period of a loan.
Product | Interest Rate | APR |
---|---|---|
30-year fixed-rate | 7.342% | 7.432% |
20-year fixed-rate | 7.083% | 7.188% |
15-year fixed-rate | 6.552% | 6.694% |
10-year fixed-rate | 6.156% | 6.343% |
Most lenders have a rate float down policy, which will allow us to get the rate lowered for you should rates drop after approval. It does not matter whether you have signed the mortgage commitment or not. While some lenders will allow for unlimited rate float downs, others will limit you to just one.
This is what is meant by a rate lock extension. If the lender is at fault for taking a longer period than promised, the lender pays the rate lock extension fee. If the borrow is at fault, then the buyer pays the rate lock extension fee.
When Will Mortgage Rates Go Down? Mortgage rates are expected to decline when the Federal Open Market Committee cuts the benchmark interest rate, which is likely to happen in the second half of 2024. But as long as inflation runs hotter than the Fed would like, rates will remain elevated at their current levels.
Mondays tend to be slower, and less volatile, so if rates are already low, you should lock in then. However, rates fluctuate more in the middle of the week, and you could take advantage of this if they dip. You might be tempted to wait it out, float your rate and see if you can get a lower rate before locking in.
Mortgage interest rates may not change predictably from month to month or season to season, but home prices do. If you want the best deal on your mortgage, consider buying a home when prices are at their lowest: late fall and early winter. Home prices peak just about every year in the summertime.
Each morning, Monday through Friday, banks and their loan officers get a fresh “mortgage rate sheet” that contains the pricing for that day... Mortgage rates do not change during the weekend, though pricing can definitely change between Friday and Monday.
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