Lock In A Mortgage Rate?

Mortgage Rate

mortgage ratesMortgage rates have dipped to new 2016 lows. And despite some volatility prior to the Federal Reserve’s short-term rate announcement yesterday, interest rates are holding near the lowest levels in three years.

“The 10-year Treasury yield continued its free fall this week as global risks and expectations for the Fed’s June meeting drove investors to the safety of government bonds. The 30-year mortgage rate responded by falling 6 basis points for the second straight week to 3.54% — yet another low for 2016, ” Sean Becketti, chief economist for Freddie Mac, said in a news release.

As lenders completed updating their rate sheets Thursday, a NerdWallet survey found average mortgage rates for the most popular loan terms slightly lower than yesterday. NerdWallet compiles lender interest rates plus fees (APR) — the most accurate way for consumers to compare rates:

(Change from 6/15)

30-year fixed: 3.68% APR (-0.02)

15-year fixed: 3.05% APR (-0.01)

5/1 ARM: 3.32% APR (-0.01)

And more good news for buyers or refinancers: Becketti believes rates won’t move much in the near term.

“Wednesday’s Fed decision to once again stand pat on rates, as well as growing anticipation of the U.K.’s upcoming European Union referendum will make it difficult for Treasury yields and — more importantly — mortgage rates to substantially rise in the upcoming weeks, ” he said.

Meanwhile, mortgage applications fell 2.4% from one week earlier, according to the Mortgage Bankers Association report for the week ending June 10, 2016. Purchase applications were down 5%, as refi applications lost 1%. Overall, home purchase loan applications were still 16% higher than the same week one year ago.

By standing pat, the Fed met the expectations of the market — but signaled higher rates are still on its agenda.

“The post-meeting statement indicated the Fed still looks to make two more rate hikes before the end of the year and three per year starting in 2017, ” wrote mortgage rate analyst Al Bowman in a note to clients late Wednesday. “It also referenced the slower growth in the employment sector, but they expect that to be only temporary. It did not address potential issues if Britain does decide to leave the Euro, which is a bit interesting since that vote is coming very soon.”

Lock or float your mortgage rate?

“I believe it’s time to be in a conservative approach toward rates. The risk versus reward of floating a rate for potential gain, compared to the risk of rates going up, is definitely tilted where I would recommend locking, ” Bowman tells NerdWallet. “As for mortgage rates, I think there’s too much stacked up against them to see them go much lower at this point. I think there’s much more likelihood of them going significantly higher than seeing rates go significantly lower.”

As always, any decision to lock a mortgage rate should be based on the borrowers’ risk tolerance and their short- and long-term goals.

NerdWallet daily mortgage rates are an average of the lowest published APR for each loan term offered by a sampling of major national lenders. Annual percentage rate quotes reflect an interest rate plus points, fees and other expenses, providing a more accurate view of the costs a borrower might pay.

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