Why Even "The Gamblers" Are Asking To Lock Mortgage Rates As Early As Possible

If you look at mortgage rates today and compare them to January's numbers, not much has changed:

30-year fixed: Still hovering near 6 percent
7-year ARM: Still lower than 30-year fixed rates
5-year ARM: Still lower than 7-year ARM rates

But on a day-to-day basis, the market is not as smooth as the comparison would have you believe. Mortgage rates are more like The Vortex -- two double-loops, a corkscrew and a batwing.

Enough to make you vomit.

If you've been shopping for a mortgage lately, you know what I mean (alternate link) and unless you're getting my Twitter updates piped to your mobile, you're left looking for clues anywhere you can find them.

For example, although mortgage rates were the mirror-opposite of the stock market Thursday and Friday, there's no long-term relationship between the two upon which we can draw. We can't say "when stocks are up, rates are down", or vice versa, because there are many days that the two move in tandem.

The biggest clue we have about mortgage rates is that they respond to expectations about the economy. Because of that, we should expect the loop-de-loops to continue until 1 of 3 things become clear:

It's proved that the U.S. economy is in a recession
It's proved that the U.S. economy is experiencing inflation
It's proved that the U.S. economy is experiencing both recession and inflation at the same time

Unfortunately, recognizing recession and inflation is a lot easier in hindsight; the same way we look back at a bubble. While you're in it, it's too hard to tell what's happening.

For example, just when the experts think our economy is growing gang-busters, we get hit with record unemployment data and talk of panic.

So much for the experts.

Mortgage rates are getting whipped the ongoing Recession vs Inflation debate, so if you're not the type to gamble with your household budget, consider locking your rate right away. What you're really doing is locking in a worst-case mortgage rate scenario.

Shoot, even if you do like to gamble, think about locking in. Even though mortgage rates may fall, they may not fall during the time period that you need them to.

In other words, rates may not fall until after your closing.

Instead of waiting for the big drop, take some chips off the table by locking in now. If rates fall after your closing, you can always remortgage down to the lower rate. And by then, maybe we'll know if this was a recession or just a blip on the radar.