Why Mortgage
Rates Change So Much
Did
you ever wonder why mortgage rates fluctuate so much and you’re encouraged to
lock in a rate? Why can’t they just stay the same for a few weeks or a few
months.
They’re
a little like stock prices in that they change based upon supply and demand,
and the rates are affected by inflation rates. Additionally, they are impacted
by the secondary mortgage market.
What Is the
Secondary Mortgage Market?
The
secondary mortgage market is where loans and servicing rights are sold by
market leaders Fannie Mae and Freddie Mac, and also purchased by investors such
as mutual fund companies, banks, hedge funds, and teacher and municipal pension
funds. (see more information in this Yahoo!
Homes blog post)
What are the
other things that impact the rates?
From
Homeguides in the
San Francisco Chronicle:
Growth
The
economy naturally grows and shrinks and is very sensitive to events within the
economy as well as outside the economy. When the economy is on a growth path
the demand for money increases and interest rates are pushed upward. The
opposite is true when economic growth slows or stops.
Inflation
A
key concern during periods of economic growth is inflation. Inflation increases
prices and deteriorates spending power in the economy, which slows growth. The
implication for future homeowners is that inflation pushes mortgage rates
higher as lenders increase interest rates to hedge against the effects of
inflation on profits, making home buying more expensive.
Federal Reserve
Board
Economic
activity is measured nationally to determine the appropriate interest rate.
Money Supply
Although
the Federal Reserve is unable to directly set interest rates, the agency can
influence rates indirectly by increasing or decreasing the supply of money in
the economy. By increasing the money supply, the Federal Reserve puts downward
pressure on interest rates. Decreasing the money supply puts upward pressure on
interest rates. Consequently, if the Federal Reserve decreases interest rates,
mortgage rates come down and borrowing for a home purchase is cheaper and
encourages home buying.
We’ve
written posts on how this is going to impact not only mortgage
rates but fees that are charged. With all of these factors, rates can
change frequently.
So What’s This
Mean For You?
Work
with a reputable mortgage loan officer. A good loan officer will diligently
monitor interest rates for their clients, and advise them of opportunities to
manage their mortgage debt at a better rate. They will also let you know up
front about industry trends that may impact your rate, and offer
recommendations as to the best time to lock in a rate during the process.
Why Mortgage
Rates Change So Much
Did
you ever wonder why mortgage rates fluctuate so much and you’re encouraged to
lock in a rate? Why can’t they just stay the same for a few weeks or a few
months.
They’re
a little like stock prices in that they change based upon supply and demand,
and the rates are affected by inflation rates. Additionally, they are impacted
by the secondary mortgage market.
What Is the
Secondary Mortgage Market?
The
secondary mortgage market is where loans and servicing rights are sold by
market leaders Fannie Mae and Freddie Mac, and also purchased by investors such
as mutual fund companies, banks, hedge funds, and teacher and municipal pension
funds. (see more information in this Yahoo!
Homes blog post)
What are the
other things that impact the rates?
From
Homeguides in the
San Francisco Chronicle:
Growth
The
economy naturally grows and shrinks and is very sensitive to events within the
economy as well as outside the economy. When the economy is on a growth path
the demand for money increases and interest rates are pushed upward. The
opposite is true when economic growth slows or stops.
Inflation
A
key concern during periods of economic growth is inflation. Inflation increases
prices and deteriorates spending power in the economy, which slows growth. The
implication for future homeowners is that inflation pushes mortgage rates
higher as lenders increase interest rates to hedge against the effects of
inflation on profits, making home buying more expensive.
Federal Reserve
Board
Economic
activity is measured nationally to determine the appropriate interest rate.
Money Supply
Although
the Federal Reserve is unable to directly set interest rates, the agency can
influence rates indirectly by increasing or decreasing the supply of money in
the economy. By increasing the money supply, the Federal Reserve puts downward
pressure on interest rates. Decreasing the money supply puts upward pressure on
interest rates. Consequently, if the Federal Reserve decreases interest rates,
mortgage rates come down and borrowing for a home purchase is cheaper and
encourages home buying.
We’ve
written posts on how this is going to impact not only mortgage
rates but fees that are charged. With all of these factors, rates can
change frequently.
So What’s This
Mean For You?
Work
with a reputable mortgage loan officer. A good loan officer will diligently
monitor interest rates for their clients, and advise them of opportunities to
manage their mortgage debt at a better rate. They will also let you know up
front about industry trends that may impact your rate, and offer
recommendations as to the best time to lock in a rate during the process.
Why Mortgage
Rates Change So Much
Did
you ever wonder why mortgage rates fluctuate so much and you’re encouraged to
lock in a rate? Why can’t they just stay the same for a few weeks or a few
months.
They’re
a little like stock prices in that they change based upon supply and demand,
and the rates are affected by inflation rates. Additionally, they are impacted
by the secondary mortgage market.
What Is the
Secondary Mortgage Market?
The
secondary mortgage market is where loans and servicing rights are sold by
market leaders Fannie Mae and Freddie Mac, and also purchased by investors such
as mutual fund companies, banks, hedge funds, and teacher and municipal pension
funds. (see more information in this Yahoo!
Homes blog post)
What are the
other things that impact the rates?
From
Homeguides in the
San Francisco Chronicle:
Growth
The
economy naturally grows and shrinks and is very sensitive to events within the
economy as well as outside the economy. When the economy is on a growth path
the demand for money increases and interest rates are pushed upward. The
opposite is true when economic growth slows or stops.
Inflation
A
key concern during periods of economic growth is inflation. Inflation increases
prices and deteriorates spending power in the economy, which slows growth. The
implication for future homeowners is that inflation pushes mortgage rates
higher as lenders increase interest rates to hedge against the effects of
inflation on profits, making home buying more expensive.
Federal Reserve
Board
Economic
activity is measured nationally to determine the appropriate interest rate.
Money Supply
Although
the Federal Reserve is unable to directly set interest rates, the agency can
influence rates indirectly by increasing or decreasing the supply of money in
the economy. By increasing the money supply, the Federal Reserve puts downward
pressure on interest rates. Decreasing the money supply puts upward pressure on
interest rates. Consequently, if the Federal Reserve decreases interest rates,
mortgage rates come down and borrowing for a home purchase is cheaper and
encourages home buying.
We’ve
written posts on how this is going to impact not only mortgage
rates but fees that are charged. With all of these factors, rates can
change frequently.
So What’s This
Mean For You?
Work
with a reputable mortgage loan officer. A good loan officer will diligently
monitor interest rates for their clients, and advise them of opportunities to
manage their mortgage debt at a better rate. They will also let you know up
front about industry trends that may impact your rate, and offer
recommendations as to the best time to lock in a rate during the process.
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