We live in a very fast-paced world with information that can move the global economy in a matter of minutes. Interest rates used to be set monthly or weekly, but we now receive updated rates daily, and depending on the volatility in the markets, can receive several rate updates each day.
As a mortgage professional, one of the most important aspects of our role is to understand the various factors that affect mortgage rates. By understanding what causes mortgage rates to increase or decrease, we can better advise our clients when to lock-in their rate.
A mortgage rate lock is a guarantee of a specific interest rate for a set period of time, usually from initial loan approval, through processing and underwriting, to loan closing. Locking a rate helps keep your home loan’s interest rate from moving higher before closing. During the underwriting and processing of a mortgage, rates can fluctuate enough to potentially cost or save you thousands of dollars over the time you hold the loan. If you’re comfortable with your rate, and the monthly payment fits your budget, consider locking.
As lenders, we subscribe to several websites that provide us real-time data on a wide-range of financial markets that impact mortgage rates. These websites offer important information on mortgage backed securities, the stock market indices, and treasuries. They also provide daily updates from industry experts that speak about various market moving events and how they will impact mortgage rates.
First Centennial Mortgage provides a monthly calendar that shows us every impactful report that will have data released in that month, as well as a sample of market moving reports. There are on average 68 market moving reports each month; knowing which reports to watch and what they mean is an important part of understanding rates. Market moving reports include ISM manufacturing, jobless and continuing jobless claims, Non-Farm Payrolls, Average hourly earnings, etc.
A good indicator on the direction of mortgage rates is the 10-year UST. If the 10-year is going up, mortgage interest rates are most likely going up; if the 10-year is dropping, then interest rates are most likely going down.
The overall global market situation is very complex and volatile, but with the tools, knowledge and experience we have as mortgage professionals, it makes the education process very simple. Our job, as mortgage professionals, is to transfer our knowledge and expertise to our clients, to educate them, not only on the rates, but also on the process of a loan, allowing them to understand all facets of the mortgage transaction. The best way to understand the process is to make sure there is 100% transparency. There is no such thing as a bad question during the mortgage process; the more you learn, the better prepared you will be when you refinance or purchase a new home.
Contact your First Centennial Mortgage expert to learn more about locking-in your interest rate.