An interest rate lock is an agreement between a borrower and a lender that guarantees a specific interest rate for a set period, typically ranging from 30 to 120 days, while the mortgage application is being processed. During this time, the lender commits to honouring that rate even if market rates rise before the loan closes.
The purpose of a rate lock is to protect buyers from fluctuations in the market. Mortgage interest rates can fluctuate frequently in response to changes in economic conditions, central bank decisions, inflation trends, and other financial indicators. Without a rate lock, a buyer who qualifies for a mortgage at one rate today could face a higher rate tomorrow, potentially increasing their monthly payments and total borrowing cost.
The mortgage pre-approval process is the first major step toward securing financing for a home purchase. During pre-approval, a lender reviews the borrower’s income, credit score, debts, and assets to determine how much they can borrow and at what potential interest rate.
However, it’s important to note that a pre-approval does not automatically include a rate lock. In most cases, a rate lock is only available once a buyer has chosen a specific property and a formal mortgage application is in progress. This is because lenders need property details—such as the purchase price and appraisal value—to finalize the loan terms.
Mortgage rates are influenced by a wide range of economic factors. They often respond to changes in inflation, employment data, consumer demand, and monetary policies established by central banks. For example, when inflation rises, lenders tend to increase rates to maintain profitability. Similarly, when the economy strengthens, interest rates often go up as demand for credit increases.
Global financial events, housing market trends, and government bond yields can also impact mortgage rates. Because these factors are constantly shifting, the rate you’re offered today might not be available tomorrow. For homebuyers, this uncertainty can make budgeting difficult—especially if it takes several weeks to find and close on a home.
The Typical Duration of Rate Locks
Rate locks are generally available for timeframes ranging from 30 to 120 days, although some lenders offer extended options for up to 180 days or more. The duration you choose should align with your home-buying timeline.
A shorter lock period—such as 30 or 45 days—is often less expensive and works well for buyers who are close to finalizing their purchase. Longer locks provide more flexibility, which can be useful if you are still house hunting or waiting for construction to finish on a new property. However, longer locks can come with additional fees or slightly higher interest rates because the lender is taking on more risk over time.
If your rate lock expires before you close on your loan, you may need to request an extension, which may involve a fee or a rate adjustment. This makes careful timing essential during the pre-approval and home-buying process.
Once you’ve completed the pre-approval process and are ready to make an offer on a home, you can request a rate lock from your lender. The process usually involves selecting the lock duration and confirming the loan terms, including the interest rate, loan amount, and type (fixed or variable).
After the rate is locked, you’ll receive written confirmation from the lender detailing the rate, the lock period, and the expiration date. As long as the loan closes within that period, your interest rate remains secure even if market rates rise.
However, if market rates drop during your lock period, you might not automatically receive the lower rate. Some lenders offer a “float-down” option, which allows you to take advantage of lower rates before closing, usually for an additional fee. This feature provides flexibility but isn’t available on all loan programs, so it’s important to discuss it with your lender before finalizing your lock agreement.
Locking in your interest rate offers several important advantages for homebuyers. The most obvious benefit is protection against rising rates. If rates increase while your loan is being processed, your locked rate will stay the same, helping you avoid higher monthly payments.
A rate lock also provides peace of mind during an already stressful process. Knowing exactly what your mortgage rate will be allows you to calculate your monthly payments accurately, budget more effectively, and plan for long-term financial stability.
Additionally, locking your rate can make you a more confident buyer. You’ll be able to focus on finalizing your home purchase without worrying about unpredictable rate fluctuations that could affect your affordability.
The best time to lock in your rate depends on market conditions and your progress in the home-buying process. If mortgage rates are trending upward, locking your rate sooner may protect you from paying more later. On the other hand, if rates are expected to drop, it may make sense to wait—though this comes with the risk that rates could move in the opposite direction.
During the pre-approval stage, keeping an eye on rate trends and staying in touch with your lender can help you make the right decision. Some buyers choose to lock in their rate as soon as their offer is accepted, while others prefer to wait until the appraisal or underwriting stage to ensure there are no unnecessary delays.
In all cases, timing and communication are key. A well-timed rate lock ensures financial stability and prevents last-minute surprises that could disrupt your closing plans.
An interest rate lock is one of the most valuable tools available to homebuyers, especially in a fluctuating market. During the pre-approval period, it offers protection from rate increases, simplifies budgeting, and provides reassurance as you move toward purchasing your home.
While not every buyer will choose to lock in their rate immediately, understanding how the process works—and how it fits into your pre-approval timeline—can help you make smarter financial choices. By partnering with a knowledgeable lender and staying informed about market trends, you can use a rate lock strategically to secure the best possible mortgage terms.