Why you should lock in your mortgage rate this April

There are few events that are quite as satisfying as unlocking the door to your newly purchased home for the first time. And buying a home can have a meaningful impact on your ability to build wealth. After all, if you're renting, your monthly payments aren't generating any equity and until you buy a home, you'll likely always have a monthly rent payment to make.

But that's not the only reason you should act now if you're interested in purchasing a home. In fact, waiting too long to lock in your mortgage rate in today's inflationary environment could be a mistake. Below, we'll break down three reasons why you should consider locking in a mortgage rate this month. 

Lock in your mortgage rate now to avoid paying potentially higher rates in the future. 

Why you should lock in your mortgage rate this April

Many homebuyers have been waiting on the sidelines for interest rates to fall, but that could prove to be a mistake. Here's why: 

Unabated inflation continues

Inflation rates came in hotter than expected in January, February and March. And increasing rent prices have played a significant role in those higher than expected inflation rates. As unabated inflation continues, the high cost of renting a home may only grow. 

At the same time, stubborn inflation has already started to send mortgage rates up. In fact, the average 30-year mortgage rate was 6.82% on April 4, 2024. Today, the average 30-year mortgage rate is 7.22% - 0.4% higher. 

The good news is that if you lock in your mortgage rate now, you can avoid any continued increases in those rates. And when you buy your home, you'll know that there's no landlord involved who can raise your housing costs.  

Don't wait for inflation to push rates even high. Lock in your mortgage rate today. 

The Federal Reserve may raise rates

The Federal Reserve's federal funds rate is the primary benchmark interest rate that lenders typically base their interest rates off of. And the Fed pushed that rate to a 23-year high in an attempt to combat COVID-era inflation. As inflation cooled, expectations of rate cuts started to circulate. But those expectations are dwindling. 

"With recent inflation reports higher than the Fed would have liked, Jerome Powell has indicated rate cuts by the end of the year may not be a given," explains Alex Blackwood, CEO and co-founder of the alternative real estate investing platform, Mogul Club. "Because of his statements, mortgage rates have reacted by jumping."

But those rate increases could just be the beginning. Keep in mind that the Federal Reserve typically raises its federal funds rate when inflation is too high. And inflation rates have been up for the past two months. 

So, not only is the Fed less likely to cut rates in 2024, if inflation data continues to be a cause for concern, it could increase them. That could mean that higher mortgage rates are ahead. In turn, by locking in your rate now, you can avoid potentially higher borrowing costs later. 

The U.S. housing supply gap may grow

The housing supply in the United States has failed to keep up with demand as of late, which has given sellers the upper hand. However, as more homebuyers await lower rates on the sidelines, an opportunity has emerged. 

"While there is a low amount of supply, the waning promise of lower interest rates by year end has dried up some of the demand," says Blackwood. "Sellers may be skittish and willing to sell with more concessions."

That's good news for buyers - for now. If there is any indication that rates may go down, buyers could begin to flood the market, further expanding the housing supply gap and limiting the concessions sellers are willing to make. So, locking in your mortgage rate now may mean you get a better deal on your home. 

Lock in your mortgage rate now before the supply gap has the potential to grow. 

The bottom line

If you're thinking about buying a home any time soon, now may be the right time to lock in your mortgage rate. As inflation continues, the risk of further increases to mortgage rates becomes more pressing. Moreover, the housing supply gap could grow if you wait too long. But beyond that, it's also important to think about what's best for your family. 

"Regardless of mortgage rates and economic conditions, it comes down to affordability, finding the right home for you and your family, and understanding that, eventually, mortgage rates may come down," says Todd Gosden, senior vice president of national sales at the mortgage lending company, Keller Home Loans. So, it may be wise to purchase a home that meets your family's needs now, and refinance your mortgage later if rate cuts do come to fruition.