What causes Interest Rates to change?

There are a couple of reasons why interest rates change. The first is supply and demand. Most mortgages are put into pools and then sold to investors through mortgage backed securities that offer a rate of return similar to a bond. If investors feel the economy is doing well, stocks will go up and investors will place more money in stocks and less in bonds (and mortgage backed securities) or vice versa. As a result, a strong economy generally means higher interest rates, and a slower economy generally means lower interest rates.

The second is inflation. Inflation is the enemy of low interest rates. When an economy grows too fast, inflation can occur. Inflation means the cost of goods goes up and the dollar doesn't go as far. High inflation means higher interest rates and low or no inflation means lower interest rates.

As a result, every economic report can potentially affect interest rates, some more than others. In general good news for the economy is bad news for interest rates and bad news for the economy is good news for interest rates.

When should I lock my Interest Rate?

Locking your rate means committing to a specific loan program and structure at a specific interest rate for a specific period of time. As long as you close your loan before the expiration of that lock, we are committed to honoring the terms regardless of interest rate movement. Rates can be locked in anytime after the loan application has been made, subject to loan approval, but no later than seven business days before the scheduled closing date of your loan. Rates can be locked for varying periods of time.

Typical lock periods are 30, 60, 90, 120, 150, and 180 days. However, we can lock in for up to 700 days. As a rule, the longer period of time you are locking in the loan, the more expensive the loan will be either in higher fees and/or higher interest rate. Long term locks often have some type of up front lock fee attached to them.

Rates are subject to change at anytime and without notice and do tend to move up and down from day to day based on market activity. Rates may even change during the day, depending on market volatility.

When should you lock? The best time for you to lock depends on a couple of different variables including when you are scheduled to close on your loan, the affect a changing interest rate could have on your loan approval, and your tolerance for risk.

It is important for you to lock in your loan for a period of time to cover your closing date. The decision of when to lock in your loan is a personal choice that we cannot make for you. We recommend that you discuss with your Account Manager what your lock strategy is going to be and when you feel the time is right to lock in your loan contact your Account Manger.