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Why Waiting to Lock Might Hurt You

If you’ve been waiting to lock in your rate or wondering if rates still have room to fall, it’s certainly possible they’ll fall further, but if they do it won’t be by very much. Rates today for the Alpharetta, GA area are near what they were around the first of October when Freddie Mac reported the weekly mortgage rate survey produced an average 30 year rate of 4.71 percent. Over time, rates have fallen, gradually mind you, as a recent survey showed an average rate of 4.75 percent. These are averages and our rates are generally lower than what Freddie Mac will report, but the overall decline has been evident.

When you combine this fall with some increased concern about the true condition of the economy, many analysts today are beginning to doubt the Fed will make one more rate increase before the end of the year. This is curious because all the “experts” told us earlier this year the Fed will raise the Federal Funds Rate by a full percentage point by the end of the year. It’s likely this last 0.25 bump will be held off. But maybe not.

Surely you’ve noticed the big sell-off on Wall Street. Whether it’s investors cashing in their year-end profits or a true lack of confidence in the economy, whatever the cause, there’s plenty of uncertainty out there. For both stocks and bonds. But that’s the catch- once one or the other is validated through a string of economic reports and investor confidence, we’re sort of in a holding pattern. And during times of uncertainty, even the briefest of notions of uncertainty, investors get out of stocks and put money into the safety of bonds.

If you’ve got a loan in process or you’re thinking about buying or refinancing soon, there are perils in waiting. Those in the industry know that it takes quite a bit of effort to get interest rates to fall but it can take just one small hiccup and one can lose a full quarter percentage point within the course of a single day. And here’s another thing, no analyst, no mortgage loan officer or economist can tell you what rates are going to do next week much less one year. General trends, yes, but all anyone can do is tell you where rates have been, no one can peg where they will be. The Fed was wrong or at least appears to be changing course mid-stream. And even if rates do move lower it won’t be by very much. Why?

The fact is our economy is still doing very well. Job gains are strong, wages are up, and the unemployment rate is still sub-4.00 percent. Those who are betting on lower rates must be looking at something else other than current data but instead are doing a bit of a gamble. If it’s beneficial for you to refinance now or you’re in the process of a purchase and wondering whether or not it’s a good idea to lock now or wait, the prudent choice is to take what’s available now. Some consumers can get themselves so wrapped up in following interest rates they overlook the forest for the trees. And again, when rates move up they won’t do so at a snail’s pace, they’ll likely wipe out all the gains we’ve experienced for nearly two months now.

Another issue with waiting for rates to move a bit lower is qualifying. When you get your preapproval letter in hand or get a current rate quote to buy a home, higher rates could push many out of their approval zone and be forced to buy a smaller home due to the higher rates or get out of buying a home altogether. The interest rate market doesn’t care one way or the other if someone qualifies for a home or that a refinance makes sense. Interest rates are at the hands of consumer expectation, confidence, economic data and investor mood. And it’s the economic data released that directly affect the other three, not the other way around.

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