There is not enough information to answer your question accurately. I would need to know your loan amount, loan to value, and credit score.

I will tell you that if your loan amount is over $417,000 (the fannie mae conforming loan limit) then 7 1/8% is not too far off the mark...I would have to see how much you paid in closing costs as that would determine what fees were paid on your behalf by the lender--that can make a huge difference in rates.

It is important to note that all banks have different rates that change at different times based on: different adjustments to their base rate, and a dynamic market that can change multiple times a day. It is quite maddening and almost impossible for the average person to keep up with--only mortgage nerds like me actually follow this stuff with any regularity.

There is nothing illegal about not floating your rate down. Just because you fill out the "float down request" doesn't mean that they automatically grant you a float down. One of the advantages to the type of loan you did which is known as a "construction to perm loan" is that the you only have to shop once and pay only one set of closing costs. That can trap you though as you now have to justify another set of closing costs when considering shopping the market for a new pernanent loan.

One negotiation tactic you can use is to shop the market and find a lower rate. Get that in writing along with a guarantee of closing costs. If a lender will not guarantee their closing costs, I would not waste my time with them. Just because rates change on a daily basis, does not mean that your closing costs should change. (I will explain this in more detail in a later post) Take that back to your construction lender and tell them to match the deal or you will walk. As long as you will stay in the home long term, even a small interest rate adjustment can make a difference.