Should you lock in your mortgage rate before the April Fed meeting?

The Federal Open Market Committee (FOMC) meetings of the Federal Reserve take place periodically, with the next meeting scheduled for April 30, 2024 to May 1, 2024. These meetings are important because the Federal Reserve typically discusses the state of the economy and possible currency changes. politics. This means that the Federal Reserve usually makes decisions about federal funds rates at these meetings (if it will increase, decrease or leave your target rate the same).

This is important because the federal funds rate is the primary benchmark rate that consumer interest rates (such as type of mortgage) are based on So if you are in the market for a new homemay be prudent lock in your mortgage before April FOMC meeting.

Secure your mortgage now before potential increases materialize.

Should you fix your mortgage before the April Fed meeting?

When you are looking for a new home and are pre-approved for a mortgage, you may have the option of lock in your mortgage rate before closing the house. This can be advantageous, especially when mortgage rates are on the rise (which has been the case lately). On the other hand, there are valid reasons why you may want to stop foreclosing on your mortgage. Here are some reasons why you might (and why you might not) want to lock in your mortgage before the next Fed meeting:

Why you might want to lock in your mortgage

Perhaps the most important reason to lock in your mortgage rate before the Fed's April meeting is to ensure that your rate won't go up. This is a valuable perspective right now, as 30-year mortgage rates have already risen from 6.82% on April 4, 2024 to average rate today of 7.29%, almost half a percentage point difference.

These rates increase largely as a result of a a strong recent employment report i inflation growth. If the Federal Reserve suggests it will delay rate cuts after these data, mortgage companies could respond with further increases in the rates they charge. But, if you lock in your rate before the next Fed meeting, you won't be subject to those potentially higher mortgage rates.

“If you're in the process of buying a home and you've already made a commitment, I think it would be wise to lock in your rates at this point,” explains Aaron Cirksena, founder and CEO of financial planning firm MDRN Capital. .

It's worth noting that locking your rate can put more control in your hands. That is, as long as the rate you're blocking has a downgrade option. If it does, and the average mortgage rate rises, you won't be subject to a higher mortgage rate when you buy your home. On the other hand, if rates fall, your downgrade option means you can unlock your current rate and secure the new, lower one.

Finally, mortgage rates are cyclical. Therefore, rates will go through upward and downward cycles. But locking in your mortgage rate, and even foreclosing on your home, doesn't necessarily mean you'll be stuck paying the rate you locked in or closing until you pay off your home. Instead, you can refinance your home later, when a downward mortgage rate cycle comes into play.

Take control of your mortgage rate by locking in now.

Why you might not want to lock in your mortgage

While it may be wise to lock in your mortgage rate before the April Fed meeting, there are a few reasons why you may want to hold off on fixing your rate.

• The rates are high: The The federal funds rate is frozen at a 23-year high. Although the federal funds rate does not dictate mortgage rates, it is commonly used as a benchmark for them. Therefore, mortgage rates are also high at this time.
• Rates could drop: The Federal Reserve usually moves the federal funds rate target in response to inflation. When inflation is high, rates tend to rise and when inflation cools, rates tend to fall. Therefore, if inflation cools, lower mortgage rates could be on the horizon. “There's always the possibility that the Fed will pivot or offer guidance at the next meeting that sends rates a little lower,” Cirksena says. However, this probability may be minimal in the current inflationary economic climate.
• Locks are limited: Most lenders allow you to lock your rate for a period of 30 to 120 days. If you haven't started your house search, or you're at the beginning, a 30-120 day lock could speed up your buying process, which can cause you to make rash decisions to try to beat the rate lock deadline.

Compare your mortgage options today to find out what rate you'll benefit from.

The bottom line

If you're looking for a new home, it can be difficult to decide whether or not to fix your mortgage before the Fed's April meeting. For one thing, locking in your mortgage rate ensures that it won't go forward. And, if you have a downgrade option, you can take advantage of a lower mortgage rate if rates drop before you close on your home. Not to mention, you can always refinance later if more attractive mortgage rates come to fruition.

On the other hand, locking in your mortgage may not be the best option in today's high interest rate environment. After all, rates could go up. And since rate locks are relatively limited, locking in yours could speed up the home-hunting process.

If you're not sure whether or not locking in your rate makes sense, contact a mortgage expert now to discuss your options.