When to Lock Your Mortgage Rate: Timing Your Rate Hold

Deciding when to lock your mortgage rate can feel like trying to time the stock market. Should you lock now before rates rise? Or wait for a potential drop? Understanding rate holds and timing strategies helps you make informed decisions rather than guessing.

What Is a Rate Lock?

A rate lock (also called a "rate hold" or "rate guarantee") is a lender's commitment to honor a specific interest rate for a set period—typically 90 to 120 days. This protects you from rate increases while you house hunt or wait for closing.

How It Works:

1. You get pre-approved with a specific rate
2. The lender locks that rate for 90-120 days
3. If rates rise, you keep your locked rate
4. If rates fall, many lenders offer rate drops to the new lower rate

When Should You Lock Your Rate?

Lock Early When:

• Rates are trending upward: If the Bank of Canada is raising rates or bond yields are climbing, lock early to protect yourself
• You've found a property: Once you have an accepted offer, lock immediately
• You're risk-averse: If rate uncertainty keeps you up at night, locking provides peace of mind

Wait or Float When:

• Rates are clearly falling: In a declining rate environment, waiting may get you a better deal
• You're months from purchase: Rate locks typically max out at 120 days
• Market signals favor decreases: Strong indicators that the Bank of Canada will cut rates

The Rate Drop Guarantee

Many lenders offer a rate drop feature that works in your favor:

• If rates fall after you lock, the lender adjusts your rate down
• This usually happens automatically, but confirm with your broker
• You get protection from increases PLUS benefit from decreases

Important: Not all lenders offer rate drops. Ask specifically about this feature when getting pre-approved.

Rate Lock Timing Strategies

Strategy 1: Lock at Pre-Approval

Lock your rate as soon as you get pre-approved, especially in rising rate environments. The 90-120 day hold gives you time to shop confidently.

Strategy 2: Float Until Accepted Offer

Wait until you have an accepted offer to lock. This works better in stable or falling rate environments but carries more risk.

Strategy 3: Split the Difference

Some brokers can arrange shorter initial holds with the option to relock if rates move favorably.

What Affects Your Rate Lock Decision?

Bond Market Movements

Fixed mortgage rates follow 5-year government bond yields. Watch for:

• Bond yields rising = lock sooner
• Bond yields falling = consider waiting

Bank of Canada Announcements

Variable rates respond to BoC policy decisions. The Bank announces rate decisions 8 times per year—mark these dates.

Your Closing Timeline

• Closing in 30 days: Lock immediately after acceptance
• Closing in 90 days: Lock at pre-approval
• Closing in 6+ months: Can't lock yet—rates will reset

Market Volatility

During uncertain economic times, rate movements can be dramatic. Locking provides certainty when markets are unpredictable.

Common Rate Lock Mistakes

1. Waiting Too Long

Many buyers wait for "the perfect rate" and end up paying more when rates spike unexpectedly.

2. Not Confirming Rate Drop Policy

Assuming your lender offers rate drops without verifying can cost you if rates fall.

3. Letting Your Lock Expire

If your hold expires before closing, you'll get whatever rate is current—which could be higher.

4. Ignoring Rate Lock Fees

Some lenders charge to lock rates or extend holds. Understand all costs upfront.

The Bottom Line

Trying to perfectly time your rate lock is like timing the market—even experts get it wrong. The best approach:

1. Lock when you're comfortable with the rate offered
2. Confirm your lender offers rate drops if rates fall
3. Don't let perfect be the enemy of good

A rate you can afford today beats chasing a potentially lower rate that may never come.

Ready to lock in your rate? Get pre-approved today and secure your rate before the next move.