Pt. III: Dangers in playing the mortgage rate waiting gameby Tim Manni
Today marks the third time we’ve written a blog post under the title: “The dangers in playing the mortgage rate waiting game.” A recent question from one of our HSH.com visitors is the reason why this post has now become a trilogy.
On Wednesday evening, one of our visitors wrote in with this question:
Interest rates are on the rise for home loans, but we have the option to wait to lock. Will the rates continue to climb? Should we lock now at 4.875% or wait until January (we’re scheduled to close Feb 28, 2011)?
Before we specifically answer this question, let’s go all the way back to the first time we tackled the subject on this blog, June 20, 2009:
When mortgage rates sank to the lower end of 5% [in May, 2009], hordes of borrowers began the refinance process, eager to cash in on a lower rate. Even when the [mortgage] rate was close to 5%, some borrowers waited for rates to drop even lower. Now that the recent spike in mortgage rates has ended the refi dream for many, some borrowers are blaming themselves that they didn’t lock in fast enough.
When we wrote about the “dangers in playing the mortgage rate waiting game” for the second time in October of 2009, mortgage rates were “among the lowest average rates seen in 2009,” and again, many considered waiting for rates to fall even lower before pulling the trigger on their home loans.
Even though the mortgage rates in the posts from June and October of 2009 were different, our cautions and concerns remain the same. Whether current mortgage rates are rising or falling, trying to time the bottom of the mortgage market is an extremely unpredictable and typically unsuccessful venture.
“More people get burned trying to time the bottom of the mortgage market than the top of the stock market,” said HSH VP Keith Gumbinger.
While we’re not in the business of telling consumers what to do, we can offer this same piece of advice we first shared with readers in June of 2009:
The best advice we can give is to always be prepared. If you’re interested in refinancing, have a mortgage rate in mind so if rates are trending downward [or begin to rise], you’ll be able to lock in quickly and save. Waiting for rates to fall “just a little bit lower” can get you into trouble if rates decide to shoot upwards.
I hope that helps to answer the question.