Should you lock in a mortgage rate when rates are decreasing?

Core Insights - Mortgage interest rates fluctuate daily, making it essential for borrowers to lock in rates to protect against increases before closing [1][2] - A mortgage rate lock guarantees that the interest rate remains the same until the loan closes, provided there are no changes to the loan application [2] - The current mortgage rate environment is characterized by unpredictability, with recent decreases attributed to external factors like government shutdowns [7][14] Summary by Sections Mortgage Rate Lock Definition - A mortgage rate lock is a commitment from lenders to maintain the same interest rate until closing, protecting buyers from rising rates [2] Float-Down Options - If rates decrease after locking in, borrowers may be stuck with a higher rate unless they have a float-down option, which typically incurs a fee of 0.5% to 1% of the loan amount [3][20] Timing for Locking Rates - Borrowers can lock in rates after loan approval and up to five days before closing, with some lenders allowing locks during preapproval [4][12] - Market conditions should guide the decision on when to lock; stable rates may not necessitate an early lock, while rising rates warrant immediate action [5][6] Duration of Rate Locks - Rate locks can typically last 30, 45, or 60 days, with fees applicable for extensions if the lock expires before closing [8] Pros and Cons of Rate Locks - Pros include protection from interest rate hikes and easier budgeting due to fixed rates [17] - Cons involve potential missed opportunities for lower rates without a float-down option and possible extension fees [17] Steps to Lock in a Rate - Borrowers should shop around for preapproval from multiple lenders, find a home, and then contact their lender to lock in the desired rate [18] Current Market Conditions - Current mortgage rates are relatively low but unpredictable, influenced by factors like government actions, making it a potentially good time to lock in [14][21] Unique Lender Programs - Some lenders offer unique rate lock programs, such as Newrez's Lock & Shop Program, which allows for a 45-day lock with a relock option if rates drop [23]