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Slowly but gradually, mortgage interest rates look like they’re heading up again. After rates looked to be moving comfortably toward the 5% mark in early February, they’ve since risen in recent weeks, sparked by a combination of overseas conflicts and uneven unemployment and inflation reports.
And while the chances of a Federal Reserve interest rate cut at the central bank’s March meeting had previously appeared low, it’s a virtual guarantee now that they will remain on hold once the bank concludes its next meeting on March 18. How much of a certainty is it? According to the CME Group’s FedWatch tool, there’s now less than a 1% chance the Fed cuts rates this month.
Against this discouraging backdrop, then, but with the knowledge that rates here are still materially better than they had been in recent years, borrowers may be contemplating the benefit of locking in one of today’s readily available, lower mortgage interest rates now. And it may even make sense to do so rapidly, before the March Fed meeting even kicks off. Below, we’ll detail why.
Start by seeing how low your current mortgage rate offers are here.
Why a mortgage rate lock before the March Fed meeting makes sense
Not sure if it’s worth locking in a mortgage rate now? If you have a good credit score and can qualify for the lowest rates available, it may be. Here are three reasons why:
A rate pause could still lead to higher mortgage rates
There’s a common misconception that rate hikes cause mortgage rates to rise, cuts cause them to fall, and pauses keep them intact. But that’s not always the case, as mortgage rates are actually driven by a complex combination of factorswith the Fed being just one, albeit an important one. A rate pause next week, then, and the supporting reasons provided for that halt could still lead to higher mortgage rates, especially if comments made by Fed officials post-meeting indicate an extended pause.
And while lenders are free to interpret these comments as they wish, many will view a pause as reason to keep rates steady, while many others may actually raise their rate offers to protect against market unknowns ahead. But by locking in a rate in the days before the meeting, you can protect yourself against those possibilities.
Lock in a mortgage rate online today.
Economic headwinds could make today’s rates the best you’ll get for a while
The report last week showing a rise in the unemployment rate, combined with a report this week showing the progress toward lowering inflation stalling may have been reason enough to keep mortgage rates from dropping further. But geopolitical tensions and overseas conflicts aren’t helping either, especially with the market responding differently each day and stocks slumping.
In other words, until these items are somewhat resolved and tensions are reduced, the economic headwinds borrowers are facing arguably make today’s rates the best you’ll get for a while. And a “while” could be a few weeks … or it could be a few months or longer. But if you lock in a mortgage rate under 6% right now, you’ll at least be able to budget with precision, regardless of changes still to come.
You could always float down the rate before closing (or refinance after)
Finally, it’s important to remember that a mortgage rate lock doesn’t have to be permanent, nor should it be if another, better offer ultimately materializes. Many lenders will allow borrowers to “float down” their rate should a lower one present itself, prior to closing on the property. While this will mean paying a fee to the lender, the numbers here can still work in your favor if approached strategically.
And don’t forget about refinancing in the future, too, if rates improve. While not ideal, mortgage rates are cyclical. That doesn’t mean that the mortgage rates of 3% will materialize any time soon. But you may be able to refinance into a rate under 5% in the future, perhaps even sooner than it appears right now.
The bottom line
A mortgage rate lock before the March Fed meeting may not be right for every borrower, but for some, it could be a valuable move. With an expected rate pause still having the potential to cause mortgage rates to rise further, current economic headwinds leaving today’s rates at a range that may not be available much longer, and the potential to float down the rate before closing (or refinance it later on), a lock makes a lot of sense right now. Consider speaking with a lender, then, who can advise you on your next best steps and help you better time an application in today’s evolving climate.