Home > Mortgages > What’s Really Happening With Mortgage Rates?

Comments 0 Comments

To say mortgage rates are volatile right now is an understatement. Every few days for the past two months, there have been heavy swings in mortgage pricing, translating to strong gyration in mortgage rates.

Nothing can be more frustrating for a pre-approved potential homebuyer than knowing their ability to qualify and their subsequent proposed payment could change in an instant. But there are other options that can help take the volatility out of your house hunting.

Should You Lock In a Mortgage Rate?

Most lenders will not lock in your interest rate until you have a ratified purchase contract or a bona fide legitimate purchase agreement. Mortgage lenders offer interest rate locks for 30 days, 45 days, 60 days and some even as long as 90 days, with the majority of buyers doing 30-day rate locks to match the traditional 30 days for close of escrow.

Locking in an interest rate means you’ve committed to an interest rate that will be used for the term of the loan, e.g. 360 months for a 30-year fixed-rate mortgage.


  • Payment clarity upfront.
  • More time to budget and plan your finances during the escrow process.
  • More time for the lender to get your loan package through the underwriting process.
  • More allowance to focus on other aspects of your purchase offer, i.e. contractual obligations.


Should You Float?

Floating your rate is defined as simply not locking in your interest rate. Floating essentially allows your interest rate and payment to move on a daily basis until you fully commit to your lender on an interest rate.


  • The opportunity for a lower interest rates and costs.
  • Depending on your individual lender’s policies/procedures, the opportunity to switch loan programs during the loan process, such as going from a 30-year fixed-rate mortgage to a 15-year fixed-rate mortgage.


  • This can be a risky position to be in during a volatile interest rate environment.
  • You risk rates rising while you float, which could reduce your ability to qualify for a mortgage and could impact your earnest money deposit on your purchase transaction.

Which Is Right for You?

It depends on your personal threshold for how much risk you’re willing to take on by floating for interest rate opportunity. If you can qualify for the mortgage loan even if rates were to rise during your loan process, you would have the luxury of being able to take advantage of a favorable market reaction the next time the bond market rallies.

On the flipside, you’d be entering into a purchase contract with thousands of dollars on the line in exchange for what may or may not come to fruition with rates. This is why it solely depends on your appetite for risk and how much you’re willing to gamble in the market. If you have a 30-day close of escrow, that’s not much time for floating in an attempt to seize something better.

Other Timing Considerations

Don’t forget interest rates aren’t the only consideration to take during the home-buying process. Some other factors include:

  • Ordering an appraisal, or making sure value comes in at purchase price.
  • Inspections.
  • Releasing any inspection contingencies.
  • Providing updated financial documentation in a timely manner to the lender. (This is a big one!)
  • Releasing any loan contingencies.

While these steps in the purchase process seem relatively small, they can very quickly become task-heavy, which otherwise can change your focus from interest rates to making sure everything else is in order. Granted, your loan officer and real estate agent will be handling a lot of these steps in conjunction with you, but these are things to be mindful of in addition to trying to time the market.

Strategy for Locking In a Mortgage Rate

In a perfect situation, locking ahead of major economic news is generally the most conservative approach. It is expected that before large economic market mover information comes out, an idea of how the market will react is typically released beforehand.

For example, whenever the Federal Reserve makes a statement about the financial markets, usually there is information and analysis leading up to the speech before the news actually hits the markets. This gives you and your lender an opportunity to examine the market and discuss whether not it makes sense to float or lock the interest rate prior to the official announcement. Keep in mind that the speculation beforehand is just that — speculation — and you will need to make your own call based on the information.

Economic Reports to Watch

  • The jobs report on the first Friday of the month sets the tone for mortgage rates that month with many lenders.
  • Anytime the Federal Reserve makes a statement, especially lately due to the Fed’s position on the tapering of buying mortgage-backed securities.

When you get into contract to purchase a home, if you can justify locking in a rate upfront, take advantage of it. Interest rate volatility is not something you want to gamble with, as there are many other aspects to purchasing a home most might not realize.

*Mortgage Tip:  Most lenders would be happy to refinance you down the road anyway in the event rates drop. Typically, most lenders require you to wait 6 months to refinance your purchase loan.

Image: Wavebreak

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team