Whenever a consumer develops his strategy for locking a favorable mortgage rate, he should forget about trying to predict the direction of interest rates. Instead, the first thing to consider should be his capacity to assume the risk of a rise in market rates. Borrowers who could likely not afford a rate increase should seek to lock rates immediately.

On the other hand, if a borrower could withstand an increase in rates, a benefit exists in delaying the lock. Whenever market interest rates don’t change, the lock price falls as the lock period shortens. This is because the lender assumes less risk with a shorter lock. However, a borrower loses his ability to walk away from a loan provider as the closing date approaches. Therefore, with most loan providers, a borrower should lock a loan while time remains to change loan providers.

"When Is the Right Time to Lock?," Inman News Features (05/07/01); Guttentag, Jack

Abstracts Copyright © 2001; Information Inc., Bethesda, Md.