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Are Bank’s Competitive With Their Mortgage Interest Rates?

By Stacy Williams

As news of foreclosures continues to make headlines, the average homebuyer may be wondering whether it is possible to find competitive mortgage interest rates. While mortgage interest rates are determined based on a variety of factors, banks and other mortgage brokers want to attract customers, and typically offer competitive rates to lure those customers.

Background

Mortgage interest rates are the rates on a mortgage loan, which can be funded by a government-sponsored entity (GSE) like Fannie Mae or Freddie Mac, a traditional bank, or a savings and loan. Mortgage interest rates can vary based on market conditions, the borrower’s credit history and risk factors, the loan size, and the payback period. The type of mortgage chosen also helps determine the interest rate, such as whether the loan is a fixed-rate, adjustable-rate, or something in between, which are often referred to as “hybrid” mortgages.

Are Banks Competitive With Their Mortgage Interest Rates?

The short answer to this question is yes. In fact, some people blame bank competitiveness for the mortgage crisis, arguing that the desire to attract new customers caused them to lend to people who should have been turned down for a loan, and to lure those customers with low mortgage interest rates that would balloon after a set period of time. Many mortgage lenders took chances on these so-called “subprime” or high-risk loans, and a disproportionate number of these loans ended up being defaulted on.

The Bottom Line

Whether or not bank competitiveness is responsible for the mortgage crisis remains to be seen. In fact, interest rates can fluctuate from lender to lender for a variety of reasons, including supply and demand, treasury yields, stock market gains or losses, inflation, and other impersonal market forces. Competitive mortgage interest rates can be found by using a variety of brokers to obtain the best quotes from a variety of lenders. Many websites also offer quote and rate information that can be used as a starting point to find a competitive interest rate.

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3. Where Can I Find The Best Mortgage Interest Rates In Iowa?
4. What Does The Bank Look At To Determine My Mortgage Rate?
5. Can A Mortgage Broker Unlock My Current Mortgage Interest Rate?