What Affects Mortgage Interest Rates?

what affects mortgage interest rates

by Dennis Hartman

Many people would be unable to buy a home without a reasonable mortgage rate.

Supply and Demand

Like any consumer product, mortgage rates are affected by supply and demand. This controls the interest rate of mortgages on a fundamental level. When many people are seeking mortgages to buy homes, lenders can charge higher interest rates. When the economy is moving more slowly and there are fewer buyers, lenders may be forced to reduce interest rates to attract borrowers. Supply and demand keep mortgage interest rates in a constant state of flux.

Bonds

Government-issued bonds affect mortgage rates on another level. Investment firms use mortgages as an investment product, selling a stake in home mortgages (known as securities) to investors who will profit from homeowners paying interest each month. However, government bonds offer a similar long-term investment opportunity. Because bonds and mortgage securities compete for the

same investors, the performance of the bond market can drive investors away from, or toward, the mortgage security market, changing how much money is available for mortgage lending and, indirectly, the rates that mortgage lenders charge.

The Fed

Credit Worthiness

Trending in Your Area

Can an Escrow Balance Apply on Mortgage.

Whether or not an escrow balance can apply on mortgage.

  • How to Give a House Back in a Reverse.

    Giving a house back in a reverse mortgage is similar.

  • What Is Best Way for a Condo Board to.

    If a unit owner dies and the bank owns a reverse.

    Can a Lien Be Placed on Home Equity?

    A lien is generally an acknowledgement of an.

    Source: homeguides.sfgate.com

    Category: Credit

    Similar articles: