We had a borrower who did not want to lock his loan last week because he was convinced interest rates would fall further.

    But, instead of falling, rates actually rose almost 1/2% over the ensuing week.

    So – this is my reminder to borrowers to never try to time the market with respect to interest rates, as we see our clients get burned time and again.

    There Are Too Many Unknown Variables That Can Move Rates

    The reason why timing the market is so risky – even when analysts think the trend for rates is clearly downward – is that there are too many variables that can move rates significantly in the short run.

    These variables include the many economic reports that surface weekly regarding employment, inflation, GDP, and myriad other economic indicators.

    A surprisingly positive economic report or a surprisingly hot inflation report can send rates through the roof, as we have seen numerous times over the last year.

    Something else that can move rates significantly are comments by Fed officials that imply that the Fed is more or less likely to increase or decrease the Fed Funds Rate, as the markets in general seem to irrationally respond to every utterance by Fed officials.

    And last but not least, the demand and supply for bonds can also influence rates. If the market is getting flooded with more Treasury Bonds, for example, and there is too little demand to soak them all up, rates will go up.

    NOTE: As an interesting aside, there was a record high level of 10 Year Treasuries brought to market Wednesday, and, surprisingly, there was so much demand that rates fell a little.

    Borrowers Can Refi Later

    Here is another reason why timing the market is often unnecessary and/or fruitless: borrowers can refinance later on if rates fall.

    At JVM, we offer to do these refinances for free* as well via JVM’s Rate Drop Free-fi™.

    I have blogged about the folly of trying to time the market many times before, including here: Why Timing the Market Never Works!

    In that blog, I focused on buyers who try to time the housing market. I reminded everyone that the guru of investing, Warren Buffett, never times markets. I further reminded everyone of all the homebuyers I personally know who bought at market peaks but still ended up with millions in equity just by staying the course.

    TLDR: Timing the market rarely works.

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    *JVM will pay non-recurring closing costs.

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