Minneapolis, MN: Everyday as a Mortgage Loan Officer, people ask me what I think interest rates are going to do, are rates higher or lower a certain time of the year, and this morning (a Friday), I was asked if mortgage rates are higher on Friday’s.
The answer is that realistically, rates do not vary because it is spring, summer, or fall. The only pattern I’ve ever been able to see is that Friday’s and extended holiday weekends lenders do tend to be the most conservative in pricing interest rates.
It simply has to do with lender exposure if the bond market moves significantly over the weekend. Most lenders are closed over the weekend, and don’t offer rates locks over the weekend. But many mortgage lenders, including us, do allow you to lock “after hours”, and over the weekend.
Overnight rate protection
The mortgage backed securities bond markets, which is essentially what determines mortgage rates closes every weekday afternoon. Whatever the market ended at, is the rate I can offer all the way up until 8:00 AM Monday.
If I write a loan and lock the interest rate at 8:00 PM on Friday, we have to honor that on Monday when our back office people actually perform the lock, even if the bond market opens worse on Monday. Multiply that out with many Loan Officers writing loans over the weekend, and lender have the potential for huge exposure risk.
To offset the risk, many lenders will hedge their rates just a bit on Friday’s or long weekends to cover themselves just in case. By doing this, they either make a hair more money if the markets didn’t change on Monday, or they prevented a loss on Monday. Either way, obviously good business practice for the lender.
So Do I Lock On Friday’s
Yes, no, and maybe. There are so many factors that go into the lock an interest rate decisions. When are you closing? Next week, a month from now, or further out. What is your risk tolerance? What reports are coming out shortly that have potential to move the bond market higher or lower?
Ultimately, a good conversation with a licensed experienced Loan Officer who understands your wants, needs, and goals, and who is in tune with the markets is a great person to have on your side to help with the mortgage rate lock or float an interest rate decision.