Consider Locking in a Mortgage Rate Now

August 24th, 2011

Should you lock in a mortgage rate now?

You may be wondering exactly how the showdown in Washington over the debt ceiling might affect you, especially if you plan to get a mortgage loan soon. The deadline is looming for deciding what to do about the nation's borrowing limit, and the credit rating agencies have warned the U.S. about a possible credit rating downgrade. That could cause interest rates to spike. Should you try to lock in a mortgage interest rate now?

Possible credit rating downgrade

It doesn't seem likely to happen, but if the U.S. receives a downgrade of its AAA credit rating, interest rates could rise. A recent CNNMoney article states:

Fixed mortgage rates are priced in direct relation to the yields on 10-year Treasury securities. So, in the case of a downgrade, fixed mortgage rates would rise roughly in lockstep with any bump up in the 10-year Treasury yield, according to Keith Gumbinger of mortgage rate tracking firm HSH Associates. For example, if the 10-year yield rises by a quarter of a percentage point, that means a 30-year fixed rate mortgage could jump to 4.87 percent from its current average of 4.62 percent.

Compare mortgage rates now

If you plan to buy a home soon, it's a good idea to get moving and compare current mortgage rates to find the best deal. If you have a down payment and are ready to commit to a home purchase, why wait? Use a free mortgage calculator to run different interest rate scenarios before even approaching lenders.

Use a mortgage calculator

When you begin shopping for rates with various mortgage lenders, find out if there is a fee to lock in a rate and how long the lock will last. Locking in a mortgage rate now could protect you if interest rates do begin to rise because of the skirmish in Washington. A compare loans calculator can help you line up various quotes to make an informed decision about the best mortgage deal for your situation.

Adjustable-rate mortgages

If you already have an adjustable-rate mortgage (ARM), you are already locked in, and you shouldn't see an increase in interest until your mortgage loan resets. A refinance calculator can show how your monthly payments would be affected if you choose to refinance into a fixed-rate loan rather than wait for your ARM to reset.

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