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When Can Borrowers Lock Their Rate? Rate Volatility

When Can Borrowers Lock Their Rate? Rate Volatility

BORROWERS OFTEN WANT TO LOCK PRIOR TO GETTING INTO CONTRACT

Borrowers often want to lock in their interest rates prior to going into contract (they typically want to take advantage of low rates before they go up).

We are unfortunately unable to do so b/c we need to identify a property address before we can lock in an interest rate.

Hence, buyers cannot lock in their rates until they are in contract – with a property clearly identified.

Refinancing borrowers can lock in their rate as soon as we have all of their key info (loan amount, SS #, address, etc.) and as soon as they give us the go-ahead.

Some lenders allow buyers to lock in interest rates prior to identifying a property, BUT they charge for that privilege.

B/c of this, pre-locks are usually not a good deal unless borrowers are relatively certain that rates will go up.

But, if they are that certain, they should be running a hedge fund instead of buying homes. :)

RATE VOLATILITY OR THE LACK THEREOF

Borrowers also frequently ask us if we expect rates to move significantly, and we of course have no way of knowing; if we did, we’d be running a hedge fund instead of a mortgage bank…

What we do say is that rates have been surprisingly stable since the 2008 meltdown for a variety of reasons. But, rates can move significantly on occasion.

Examples of events that have moved rates significantly include President Trump’s tariff announcement on Thursday of last week, the sovereign debt crises in Europe (Greece, Portugal, Ireland, etc.), and the 9/11 Terrorist attacks (which pushed rates sharply down).

Surprising or unexpected economic news can also move rates significantly. I can recall numerous incidents where unexpected employment, inflation and GDP reports moved rates as much as 1/4 percent or more.

So, while we and borrowers have been enjoying a much more stable rate environment over the last ten years, rates still can and will move sharply on occasion.

The only problem is that nobody knows when they will.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167