If you are looking to take out a fixed-rate home loan, the actual rate you receive will not be set until the loan is settled.

However, it is possible to lock in your rate at the time of application (or approval), by using a rate lock.

A rate lock sets your interest rate, which will prevent the lender from hiking the rate prior to settlement, whilst giving the borrower even more surety at the same time.

If interest rates fall, most lenders will still allow you to benefit from the lower rate, which is an added bonus.

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Example:

If you apply for a fixed rate home loan with a 5% interest rate, that rate is still subject to change up until settlement.

You could potentially end up with a fixed-rate loan at 5.2%, for example.

‍By using a rate lock, you can agree on the interest rate at the time of application, meaning you will get a 5% rate, even if interest rates rise.

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How Much Does it Cost and How Long Does it Last?

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A rate lock fee can either be a percentage of the total loan or a fixed fee, and this varies between lenders.

Most lenders will charge between 0.15% and 0.2%, however, some might even offer the rate lock as an incentive.

Generally, the rate lock will last 60 days, however, it can be 90 days or more.

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