Locking in Interest Rates

The rate sheet on the previous page was incomplete. Time is a factor in pricing interest rates, too. Because interest rates change daily (and sometimes during the day) the longer a lender locks in a rate, the more risk that they have the market will move against them. Therefore, you pay more (in points) for a longer guarantee.

If interest rates are trending up, it makes sense to lock in your rate. If interest rates are trending down, it makes sense to "float" your interest rate so that you can take advantage of a shorter lock-in period. When rates are fairly stable, it also makes sense to "float" your loan to take advantage of a lower price for a shorter lock-in.