So Do You Lock, or What?

Grab one now, or hope for lower rates?
Sue, our in-house lender, has been locking loans for the past few days.
Anyone who was in the market for a new mortgage, for either a purchase or refinance, and was letting the rate float in hopes of locking in at a lower one, instead got hit with a half point rise in the 30-year fixed rate.
But let’s remind ourselves that loans in the mid 5% range are still good. One year ago the average 30-year fixed rate was 6.1%. And long term, it's all but assured that these rates are going to look pretty nice. It may take some time before the Fed gives up the fight and has to let rates rise to attract buyers for all the debt we now have to pay off, but it will happen. So while today’s rate is high relative to a month or two ago, it may look like a bargain in a few years.
But what about now?
Okay, enough of the long-term perspective. What if you’re still on the fence and wondering about the next few weeks and months? The recent spike has been caused by action in the 10-year Treasury market (the 30-year fixed rate tends to follow movements in the 10-year note.) Plenty of market watchers expect the 10-year Treasury to keep moving up, but it's not a sure bet that a continued rise in the Treasury will automatically cause the 30-year fixed to rise.
The Fed has been actively buying up long-term Treasuries and mortgage backed securities in an effort to help keep yields low. When rates started rising the past few weeks the Fed signaled it wasn’t too concerned; in fact it seemed happy with the idea that those slightly rising rates were a sign that the economy was gaining a bit of strength. The Fed is still worried that rates rising too quickly and too far will hurt the credit market recovery, and it’s possible to assume they will increase repurchases in an effort to push yields back down after their recent spike.
According to the Mortgage Bankers Association, mortgage applications dropped 14.2% this week compared to a week prior, but Sue reminded us that many of these applicants are owners looking to refinance, and that this move may make loans faster to process for our home buyers.