“Should I lock in my mortgage rate now … or wait?”

Real Estate Mortgage

It always seems I have a client or two who are in the midst of refinancing their home mortgage. From time to time (like now), someone I work with is even lucky enough to be going through the home-purchase process.

Inevitably, it always comes back to the mortgage rate-lock-timing question.

Mortgage Rate Lock Timing

I am not a mortgage professional and I don’t profess to have any inside scoop on rate sheets or how bankers look to price the risk of lending you money. What I do know is that overall, the moves are generally subtle and not necessarily caused by what everyone “thinks” should be a potent lever:

As you can see by this graph of US Mortgage rates, while they have moved around a bit over the last year, there is quite a bit of randomness to that movement. The FED just raised their target rate from 0.0% to 0.25% – the first raise in almost a decade. There was a lot of jabber about how this change to a rising rate environment was going to be cataclysmic. The mortgage market bumped up a tad, but nothing compared to what happened in May or late October – a time when we still had an accomodative FED.

The Wrong Question

While the difference between 3.8% and 3.95% (the October move) is not insignificant (4%), in the grand scheme of things it shouldn’t make a difference between whether or not you accept the burden of the debt. That should be based on your ability to manage the mortgage payments and the most effective use of the money you’re putting into home equity.

This is just one more case of the tail wagging the dog and the noise coming from the financial pornography sites that is just that – NOISE. Dwelling on this decision is almost certainly an ineffective use of your time and energy – the other two main resources (money is the third) that are ALL important parts of your Wealth Health.