Below is my commentary on MortgageNewsDaily today about the rate lock conundrum in a declining but very volatile rate environment.
To this I’d just add that if rates drop after you lock a loan, the locked rate isn’t just lowered to current market. All lenders have renegotiation policies and the gist of all policies is that locked borrowers can usually capture about half of a rate drop—so if rates dropped .25% after you locked, lenders may allow you to renegotiate to lower your locked rate by .125%. These renegotiations are specific to each lender’s rules and based on each client’s borrower and property profile.
A reminder today that Spain and other eurozone countries are still in a dire state caused European bonds to sell off and U.S. mortgage bonds to rally. Rates drop when mortgage bond prices rise like this. These are the blips that make the “should I lock or wait for lower rates?” question so hard to answer. Here’s my summary a couple days ago that encapsulates the way we’re working with clients to manage this volatility:
“Locking purchases as they ratify to capture current lows for clients whose purchase contracts dictate a specific timeline. Decisions to lock refis are specific to each client. If they’ve recently closed a purchase or previous refi (thus rate is only slightly higher than current market), it’s either a float or a no-cost refi depending on breakeven math for closing fees spent previously. If they haven’t refinanced in awhile (thus rate is much higher than current market), it’s a lock—whether those locks are cost or no-cost also depends on math best suited to client profile and expected time horizon in the loan and/or home.”
– This is why Europe is getting crushed today (BI)