Is rate lock wise in today’s market?

A look at the practice born in the '80s

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Loan rates have been as staccato as the stock market. After the longer process of loan approval, when do you lock the loan rate? Will your 6.5 percent fixed-rate loan go up if you don't lock it today or should you gamble on the hope of a possible tick downward? There was a time, not long ago, when rate locks were not a part of the conventional loan package. Borrowers had to pay for a lock, in addition to the loan origination fee. When mortgage interest rates were well into double digits, the offer of a paid-for rate guarantee made a lot of sense … especially in the days when a borrower could qualify for a 30-year, fixed-rate loan at 12.5 percent but did not have the income for the same loan amount at 13 percent. While the genesis of loan locks can really be traced to the high-flying rate days of the 1980s, the quasi-insurance instrument has traveled a variety of roads. It has been used as a recruiting tool for lenders, a safety net for builders who could not finish homes ...