mortgage

Mortgage rates are on the rise; now is the time to lock your rate

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Mortgage rates are poised to go up. You should lock your interest rate now.

Rates on home loans edged slightly upward in Bankrate's weekly survey. They likely are headed even higher in coming weeks because it looks like the Federal Reserve will raise short-term interest rates this month. That's sooner than many investors had expected, and it means that it's better to shop for a mortgage now.

Signaling a Fed hike

The Federal Reserve likes to let markets know of impending rate moves because it wants to avoid destabilizing markets. Two Fed messengers went on TV Tuesday to alert investors that the next rate hike could come as soon as March 15.

William Dudley, president of the Federal Reserve Bank of New York, told CNN: "I think the case for monetary policy tightening has become a lot more compelling." On CNBC, Dallas Fed president Robert Kaplan said the Fed should move "sooner rather than later."

Before those comments, many investors expected the Fed to keep rates unchanged March 15 and to raise the federal funds rate at the next scheduled meeting, May 2 and 3. But after Dudley and Kaplan spoke, the probability of a March 15 rate hike rose above 65 percent -- up from 35.4 percent a day earlier. That's according to the CME Group's FedWatch Tool, which figures the odds by analyzing the prices of futures contracts.

Mortgage rates this week

Bankrate's weekly mortgage rate survey was conducted before the market fully reacted to the Fed officials' comments. Rates barely went up, but they are likely to rise over the next week or two.

The benchmark 30-year fixed-rate mortgage rose this week to 4.31% from 4.29%, according to Bankrate's weekly survey of large lenders. A year ago, it was 3.82%. Four weeks ago, the rate was 4.33%.

The mortgages in this week's survey had an average total of 0.27 discount and origination points.

Over the past 52 weeks, the 30-year fixed has averaged 3.85%. This week's rate is 0.46 percentage points higher than the 52-week average -- a sign of rising rates.

  • The benchmark 15-year fixed-rate mortgage rose to 3.49% from 3.48%.
  • The benchmark 5/1 adjustable-rate mortgage rose to 3.48% from 3.45%.
  • The benchmark 30-year fixed-rate jumbo mortgage rose to 4.3% from 4.28%.

Weekly national mortgage survey

Results of Bankrate.com's weekly national survey of large lenders conducted March 1, 2017 and the effect on monthly payments for a $165,000 loan:

30-year fixed15-year fixed5-year ARM
This week's rate:4.31%3.49%3.48%
Change from last week:+0.02+0.01+0.03
Monthly payment:$817.51$1,178.75$739.08
Change from last week:+$1.94+$0.81+$2.75

Locking the rate

If you plan to close on a mortgage in the next 45 days or so, ask your lender whether you should lock so you can protect yourself in case interest rates rise in the coming weeks.

A mortgage rate lock guarantees that you'll get an agreed-upon interest rate if you close the loan by a certain date. Rate locks most often last 30 or 45 days, but sometimes they are shorter or longer.

You can lock after the mortgage has been approved for a specific property. For a purchase loan, that means both sides must have signed the purchase contract.

Most clients lock immediately. If you do, stop paying attention to mortgage rates so you don't go crazy if rates edge downward.

If you're too early in the process to lock a rate -- you haven't found the right house, for example -- don't panic. Mortgage rates are likely to go up, but they're not going to skyrocket.

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