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We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence. Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
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Mortgage rates have been unusually volatile this summer, jumping or plunging as much as a quarter-point in a single day. If you’re looking to lock in a loan for a home purchase or for a refinancing, the moving target adds a layer of uncertainty to an already-complicated process.
“For borrowers who are rate shopping, it’s really difficult because they could literally be quoted multiple rate and costs scenarios throughout the day from one or many lenders,” says James Sahnger, mortgage planner at C2 Financial Corp. in Jupiter, Florida.
No central authority sets mortgage rates. Ultimately, rates are established by the investors who buy home loans. Most U.S. mortgages are packaged as securities and resold to investors. Your lender offers you an interest rate that investors on the secondary market are willing to accept.
While the 10-year Treasury yield is an important benchmark for 30-year mortgage rates, investors have been struggling to make sense of the broader economy. How will the Federal Reserve’s aggressive rate hikes affect rates? What impact might a looming recession have? As investors work through those questions, mortgage rates have gyrated.
“Day-to-day and intraday volatility has been the norm for the last quarter and really since the beginning of the year,” Sahnger says.
Given the big swings in mortgage rates, borrowers are wise to take advantage of rate locks, says Greg McBride, Bankrate’s chief financial analyst.
“With home prices and mortgage rates already at high levels, affordability is very squeezed for most homebuyers,” McBride says. “Don’t make it worse by waiting to lock your rate and risking a big jump in rates. Locking your rate once you’re within 30 days of closing eliminates that risk and is one less thing to worry about.”
A rate lock protects you from an upward swing in rates. But what if you happen to lock in just before mortgage rates fall a quarter point?
“Ask your lender about a float-down option in the event of a sharp drop in rates after you’ve locked,” McBride says. “It may not be available or it may not be worth it, but it is a question worth asking.”
Lenders sometimes charge for float-down locks, so make sure the potential savings are worth any additional expense.
Even if there aren’t extra fees, there will be some fine print to consider. For example, if rates fall by a tiny amount, it might not be enough to actually put the float-down policy in action. Check the details to understand the threshold that rates must cross in order to exercise the float-down capability.
Making sense of your mortgage options is a challenge even in the calmest financial markets. The task is even trickier amid recent rate volatility.
“It’s really important to work with a mortgage broker that understands the and follows the markets,” Sahnger says.
Bankrate.com is an independent, advertising-supported publisher and comparison service. Bankrate is compensated in exchange for featured placement of sponsored products and services, or your clicking on links posted on this website. This compensation may impact how, where and in what order products appear. Bankrate.com does not include all companies or all available products.
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