Why did mortgage rates just jump, and should I lock my rate now or wait?

Doesn't the Fed set mortgage rates?

Not directly, and this is one of the most common mix-ups I hear. The Fed sets a short-term rate for banks. Thirty-year mortgage rates follow longer-term bond yields and what investors pay for mortgage-backed securities. Those react to inflation numbers, government borrowing, and world events. That's why mortgage rates can jump in a few days even when the Fed hasn't done anything, and why they can even rise after the Fed cuts.

How can I estimate where mortgage rates are headed?

Watch the 10-year Treasury bond. Mortgage rates move with it. A good rule of thumb: add about 1.5% to 2.25% to the 10-year Treasury yield, and you'll be in the neighborhood of today's 30-year fixed mortgage rates.

For example, if the 10-year is at 4.5%, typical 30-year rates would likely land somewhere around 6.0% to 6.75%. The gap tends to be on the wider end when markets are nervous, and your own rate still depends on your credit, down payment, loan type, and whether you pay points. You can find the 10-year yield on any financial news site. When it jumps, mortgage rates usually follow within a day or two.

What does locking my rate actually do?

A rate lock holds your interest rate from the offer until closing, as long as you close within the lock period (usually 30, 45, or 60 days) and nothing big changes on your application, like your loan amount, credit, or income. Page 1 of your Loan Estimate shows whether you're locked and until when.

• If rates go up after you lock, you keep your rate.
• If rates go down after you lock, you usually keep the higher rate, unless your lock has a "float-down" option. Ask if one's available and what it costs.
• If closing gets delayed, extending a lock can cost money. Ask about extension fees up front, so there are no surprises.

Should I lock now or wait?

I'd lock when:

• You have a signed purchase contract and a closing date
• The payment at today's rate fits your budget
• Another jump in rates would push the payment out of reach

Waiting (floating) is a bet that rates will drop before you close. Sometimes it works. Sometimes it costs you, and rates can move fast.

What if rates drop after I close?

You may be able to refinance later, but that depends on rates, your home's value, your credit, and closing costs at the time. So buy the house based on a payment you can live with today, not on a refinance you're hoping for.

Example scenario (illustrative)

A buyer in the Bay Area is under contract with 35 days to close, and rates jumped over the past week. The payment still fits their budget, but another jump wouldn't. They lock for 45 days to leave room for delays, ask what a float-down would cost, and decide it isn't worth it. If rates drop meaningfully after closing, we'll look at a refinance then.

Our take

Don't try to time the bond market with your house. If you're under contract and the payment works, lock it and enjoy the move. I'll always tell you exactly what your lock covers, how long it lasts, and what an extension or float-down would cost, in writing, before you decide.