Rate Lock and Float-Down: Securing Your Interest Rate

A rate lock freezes your interest rate for a specified period (usually 30–120 days), protecting you from rate increases while your application is processed. If you lock 6.2% and rates rise to 6.5% before settlement, you still pay 6.2%.

Lenders offer rate locks at pre-approval or formal approval. The lock period typically matches the expected settlement timeline (e.g., 60 days if settlement is 60 days away). If your application takes longer than the lock period, the lender will extend the lock (sometimes automatically, sometimes for a fee of $50–$200).

The downside of a rate lock: if rates fall during the lock period, you’re stuck at the locked rate. If you locked 6.2% and rates fall to 5.8%, you don’t benefit. This is why float-down options exist.

Float-down clauses allow you to benefit from rate decreases during the lock period. Not all lenders offer float-down; it’s typically a premium feature you pay for (either as an upfront fee or as a higher locked rate). A float-down might cost $200–$500 as an upfront fee, or it might be built into a 6.3% locked rate instead of a 6.2% rate without float-down.

Float-down is valuable in falling rate environments (as we’re in early 2026 with the RBA cutting). If you lock 6.2% with a float-down and rates fall to 5.8%, you can re-lock at 5.8%. This gives you upside if rates fall and downside protection (the 6.2% lock) if rates rise.

The mechanics of float-down vary. Some lenders allow one free float-down during the lock period; others allow unlimited floats. Some require you to re-lock manually; others are automatic (the lender tracks rates and re-locks if rates are favorable). Confirm the float-down terms before locking.

Rate lock costs are sometimes rolled into your loan (added to the interest rate) rather than charged upfront. You might pay 0.15–0.25% higher interest rate to secure a lock instead of paying $300 upfront. Over a 25-year loan, the 0.15% rate premium costs roughly $3,750 in extra interest, so the upfront fee is often cheaper.

Conditional locks are common. Some lenders allow you to lock at pre-approval, but the lock is conditional on property valuation and formal approval. If the property doesn’t pass valuation or your financial situation changes materially, the lock is voided.

Multiple locks can create confusion. You might lock with lender A at 6.2%, then move to lender B at 6.0% and lock again. The first lender’s lock expires; the second lender’s lock is your active lock. Confirm which lock is live before settlement to avoid surprises.

Lender comparison gets complicated with locks. Lender A offers 6.2% locked; Lender B offers 6.0% locked but with a $400 lock fee. Which is better depends on interest rate movements over the lock period and the time horizon. Usually, the lower rate wins, but the premium for locking can justify a slightly higher rate.

Switching lenders mid-lock is costly. If you’re locked with lender A at 6.2% and lender B offers 5.8%, you might want to switch. However, breaking the lock with lender A triggers break costs or penalty fees. Only switch if the rate difference is large enough to justify the break cost.

Disclaimer: This article provides general information only and should not be taken as financial or legal advice. Rate lock terms, float-down options, and break costs vary by lender. Confirm terms before locking in any rate.