Just like the stock market, mortgage rates fluctuate. They may move daily, or even hourly, and often significantly in response to global events.
When you are negotiating a mortgage, you can “lock in” the mortgage interest rate through an arrangement with your lender. The arrangement will specify a time period over which you can lock in at the current interest rate.
Before you lock in your rate, you need to ensure the rate is one you are happy with not just for now, but for as long as you have the mortgage.
Because rates fluctuate, it can—and does—happen that after you’ve locked in, rates fall. A lock is a commitment on your part to accept a certain interest rate, and it’s unlikely that you will be able to get it lowered once you’ve made this commitment through the agreement with your lender.
To be able to lock your loan, you must be either fully approved or close to being fully approved.
This is to protect the lender, because by locking in your rate, he or she is making a commitment to the investor who will ultimately purchase your mortgage.
If the lender can’t deliver on your promised mortgage, he or she will be required to pay a fee for the use of the money between the date the rate was locked and the date the investor is notified that the loan won’t be delivered.
This can become expensive for the lender. Both you and your lender should respect the mortgage lock.
Lenders are unlikely to be able to predict rates in the future, and ethically they can’t—and shouldn’t—advise you on what will happen to rates.
Everyone has access to the same market information; your lender has no more insight into rates than you do. Expect your lender to explain the process, but not to help you decide when to lock in.