Should you lock in a mortgage rate before the Fed's March meeting?
March 2024 was going to be the time when frustrated homebuyers would finally get a break. A predicted cut to the benchmark interest rate courtesy of the Federal Reserve would then lead to a reduction in mortgage interest rates. But after recent reports showed inflation more stubborn than predicted for December and January, that cut looks like it will be postponed. Now some experts are predicting the first rate cut of 2024 to come in May or June instead.
Against this backdrop, buyers seemingly have two options: Wait for rates to fall or proceed with buying a home now. For those who have elected to act now, it may make sense to lock in a rate soon, arguably even before the Fed meets again on March 19.
Below, we'll detail three reasons why you may want to lock in a mortgage rate before the Fed's March meeting.
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Should you lock in a mortgage rate before the Fed's March meeting?
Here are three compelling reasons why homebuyers may want to lock in a rate before the Fed meets again later this month.
Rates could rise again
While most aren't expecting a rate increase this month, it's more realistic than many had expected with inflation still more than a full percentage point above the Fed's target 2% goal. If the Fed feels like more work needs to be done then a rate increase could come and rates on mortgages will follow upward.
But even if the Fed doesn't raise rates and simply hints at a delayed date for cuts, rates could rise again. So much is speculative that buyers may be better served by locking in a rate now before the market experiences even further turmoil.
Explore your mortgage rate options today to learn more.
Rates are still historically low
Today's average 7.18% mortgage rate for a 30-year term is far from ideal, especially considering that the rate for that same term was around 3% just four years ago. But, historically speaking, it's still a relatively low rate. In decades past the average mortgage interest rate was 10% or higher, according to Freddie Mac data, making today's 7%-range a relative bargain.
And it's unlikely that rates will fall as low as they were in 2020 and 2021 ever again — or at least not unless something dramatically changes. With the understanding that this is the best you can secure now and with the historical knowledge that it's still better than average, it may make sense for buyers to proceed.
You have options if rates do drop
What most buyers are trying to avoid is a rate drop after they've already secured a higher rate. But there is some flexibility here and buyers will have options if rates do fall. To start, many lenders will let you unlock your current rate and relock another one up until a few weeks before you close on your property. So today's 7.18% mortgage rate doesn't necessarily need to be that high if rates come down before you close in April or May.
But even if rates take longer to drop then buyers could always refinance to a lower rate when they do. But they won't have the ability to turn back the clock and buy their dream home. So, for many, it makes sense to lock in a rate now and secure a new, lower one (either before closing or after) when the rate climate improves.
Learn more about your mortgage options here today.
The bottom line
With another Fed meeting on the schedule for this month homebuyers have to make a tough decision. But considering that rates can potentially rise again (although that's unlikely), that rates are still historically on the low end, and that there are still options if rates do fall, it can be beneficial for many buyers to act now. It may not be the right move for each buyer but with the prospect of rate cuts unknown, it may be the best decision to make for the time being.
