Greece, the Fed and Inflation—Oh, My! How Do We Get Mortgage Interest Rates?
First, here’s how we don’t:
There are three common misconceptions about how mortgage rates are determined: 1) solely by each lender, 2) by the Federal Reserve and/or 3) based on the 10-Year Treasury Note. There are still mortgage professionals claiming rates are based on the 10-Year Note. Wrong!
Now, here’s how we do:
While there are several generic interest rate trend indicators, rates can be influenced at any given moment by at numerous different variables in the market and with each individual loan approval scenario. The mortgage rate marketplace is dynamic and complex.
Lenders set their rates every day based on the market activities of Mortgage Bonds, also known as Mortgage Backed Securities (MBS). A lender might adjust their pricing up to five times in one day depending on what’s taking place in the market. A printed rate sheet can become obsolete the moment it is printed!
So what are the major influences on Mortgage Backed Securities (MBS)?
- Inflation
- Federal Reserve Actions
- Unemployment Figures
- Gross Domestic Product (GDP) Figures
- Geopolitics – Unforeseen events related to global conflict and political events
Why does this matter to you?
With multiple market indicators reporting and changing throughout any given day, timing the market for the best possible opportunity to lock a mortgage rate on a new loan is a big challenge. Top notch professionals have access to real time market data and expert analysis to guide them. Don’t work with a lender that doesn’t! Why? Because your loan’s interest rate determines the amount of lender credit you will receive for your closing costs! Locking an interest rate too early or too late can be an expensive error for which YOU end up paying!
Home shopping or refinancing and want to learn more about interest rates? Watch this video! For more information and a real time look at the mortgage market, please call me at (916) 849-9200!
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