Economists say consumers should lock in low mortgage rates now

Mortgage rates reached the lowest point in 50 years last week, and one economist predicted they could plummet even more this week

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Mortgage rates reached the lowest point in 50 years last week.

The Treasury yield began this week by hitting a record low.

And one economist predicted they could plummet even more this week.

So should consumers consider locking in a mortgage rate now or, instead, play the waiting game?

“I would go ahead and lock in a rate,” Kapfidze said. “We don’t know how this is going to play out. Lending Tree Chief Economist Tendayi Kapfidze said it’s hard to anticipate what rates are going to do, but if you’re a consumer and there are already savings on the table, “a bird in the hand is worth two in the bush.”

Mortgage rates and treasuries are connected, yes, but rates won’t move downward as fast as treasuries.

“It’s possible that Treasury rates could go lower, but that doesn’t necessarily mean that mortgage rates will go lower,” Kapfidze said. “Lenders are hitting capacity and we’ve already seen that the spread between Treasuries and mortgages have widened since the financial crisis.”

How do you lock in a mortgage rate?

A rate lock, according to real estate tech giant Zillow, is “a guarantee from a mortgage lender that they will give a mortgage loan applicant a certain interest rate, at a certain price, for a specific time period.”

Essentially, if the rates go up in that time period, you keep the lower rate that you locked in. But if they go down, unless you’ve agreed to a “float down,” — in which the consumer pays a fee to allow the mortgage rate to come down, if the market moves that way — you’re also stuck.

Loan officers can help consumers shop for the lowest rate, then ask the lender if a rate lock is available, according to Zillow. But there are a few things consumers should look out for.

“First, you don’t want to lock in the rate too early on, as rate locks are usually only good for between a few weeks to 60 days, so if your loan doesn’t process within that period, your rate lock offer will no longer be good,” the company’s information guide reads.

“Therefore, you need to make sure that the duration of your lock-in will give the lender enough time to process the loan. To do that, ask the lender to share the average loan processing time and try to get the lender to lock-in your rate for as long as possible to protect yourself.”

There are also fees often associated with a rate lock, but if the rate is so low — and expected to rise — the actual cost could be negligible. Short-term rate locks — those of less than 60 days — range from free to roughly 0.25-0.5 percent of the total loan, according to Zillow. If you need a longer period, the rate goes up.

 

 

Source: Economists say consumers should lock in low mortgage rates now | INMAN

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