When do you lock the interest rate?

Interest rates change daily based on :

1. New economic data. Review the article How does economic news affect interest rates?
2. Supply and demand of debt. Example: if the U.S. government is selling 30-year bonds, this increases supply and may cause rates to rise if there is insufficient demand. On the other hand, Japanese investors with a lot of money and tripping over each other to buy U.S. bonds will increase demand and cause rates to drop.
3. Inflation. High inflation or a possibility of higher inflation causes rates to go higher. The reason for this is that, if inflation is high, the Federal Reserve would raise rates to curb inflation.
4. Political news and world events. A war in the Middle East would cause higher oil prices.
5. Market sentiment.

Bond rates and prices vary inversely––i.e. when bond prices rise, interest rates fall and vice-versa. The 30-year bond is one of the most relevant rates to track. However, the yield of mortgage-backed securities is even more important. This is because the supply and demand for mortgage securities may be different than for 30-year bonds. There are times when bond prices move higher and mortgage security prices move lower.

Interest rates are volatile and move up or down for the strangest reasons just like the stock market. If you want to follow interest rates, you may want to do the following:

1. Find out all the economic news being released over the next two weeks. Check out this month's economic calendar.
2. Make a list of news that is most important to interest rates––inflation, industrial production, etc.
3. Follow bond- or mortgage-backed prices on a daily basis. These rates influence mortgage rates.
4. Follow mortgage interest rates on a daily basis. Bookmark web sites or obtain rates via e-mail.
5. PRAY and don't be too greedy!!
6. In general, Fridays and three-day weekends are bad for interest rates. This is because traders hate uncertainty. In many cases, traders close out positions before a weekend, which often means that they have to sell bonds which causes rates to go up.
7. Bookmark interest-rate trends.