by: Gaye Jones ~ AnnieMac Home Mortgage
That is a very complicated question. There are many factors that affect rates, but I believe the largest factor is where the investors are investing their money.
Let’s first discuss the prime rate. When the prime rate is lowered by the Feds many think that mortgage rates will dip.
Sometimes they do, but the prime rate is the rate the banks charge each other for short-term borrowing, it doesn’t always make fixed mortgage rates go down. It will make a difference on those “prime +” Mortgage programs.
In the Mortgage business we normally watch the 10-year bond market. Generally speaking, when the bond rate is up, long term mortgage rates go down.
Also, when the government buys up large quantities of mortgage backed securities, this puts an influx of money into the banks which allows them to lend more, and lower rates.
Inflation plays another role in rates. Interest rates are the cost of money and inflation is the cost of things. So, when inflation rises, interest rates usually follow!
The most important thing to remember with interest rates is keeping clean credit and good credit history.
All the conforming program’s rates are risk based, which means the better your credit, the better interest rate you will receive!