Buyers Looking to Lock in Rates

As mortgage rates move up, buyers are moving in to secure interest rates before they're priced out of the market. Most lenders offer buyers a loan lock-in period of 30, 45, 60, or 90 days. Lenders then are obligated to offer the home loan at that lock-in rate, even if rates have risen during that time. Some lenders lately have even revived “lock and shop” programs, allowing buyers to lock in an interest rate for an unlimited time before they even find a property to purchase. 

Lawrence Yun, chief economist for the National Association of REALTORS®, called August’s surge in home sales likely the “last hurrah” for the next year to 18 months as mortgage rate increases and rising prices likely dampen affordability and sales in the coming months. Sales of previously-owned homes rose in August to the highest level in more than six years.

“Rising mortgage rates hurried some people into making the decision” to close on a deal, Yun says.

Mortgage rates have been on the rise since May when the Fed indicated that it would soon be winding down its $85 billion monthly bond purchases, which had helped keep mortgage rates near all-time lows. Mortgage rates have moved up more than a full percentage point since May. The Fed announced last week it would delay its taper, which temporarily brought mortgage rates down last week from yearly highs. The 30-year fixed-rate mortgage fell to 4.5 percent last week, according to Freddie Mac.

PulteGroup said it expects the increase in borrowing costs to affect consumer segments differently. For example, James Zeumer, head of Pulte’s investor relations, says that a half-percentage point rise in interest rates could mean that some first-time buyers “will be out of the game.” Move-up buyers, on the other hand, may “have a little bit more flexibility.”

Source: REALTOR® Magazine Daily News and “Home Sales Climb as Americans Rush to Lock in Rates: Economy,” Bloomberg (Sept. 19, 2013)