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How Does The Prime Rate Affect Mortgage Rates?

By Ann White

When purchasing a home many people want to know what determines their interest rate and often ask, “How does the prime rate affect mortgage rates?”

There are a number of things that should be taken into consideration when you decide to purchase a new home. Of course, one would want to know how the selling price will affect their monthly payments, but what about those interest rates. How does the prime rate affect mortgage rates?

How does the prime rate affect mortgage rates?

Since most of us are not in the banking industry we are usually not well informed about what influences interest rates. After hearing about the prime interest rate and how it is used in many cases to determine rates on loans, we often transfer that information to fixed rate mortgages. That is just not the case.

Does the prime rate affect variable interest rates?

Though the prime rate is not tied to fixed rate mortgages, below is a list of loans that are affected according to information found at wsjprimerate.us. Bear in mind that this is just a sample and may not apply in all cases.

1. Adjustable rate mortgages
2. Debt consolidation loans
3. Personal loans
4. Business loans
5. Home equity line of credit
6. Variable rate education loans
7. Variable rate car loans
8. Variable rate credit cards

How does the prime rate affect mortgage rates?

From the list above you will notice that adjustable rate mortgages may be affected by the prime rate, but a 15-30 year fixed rate mortgage is not affected by the prime rate. As a rule long term fixed rate mortgage rates are determined more by the expected yield for a 10 year U.S.Treasury note. As always, checking with the lending institution you will be using will give you the information you need to take out a mortgage.

Related posts:

1. Does The Prime Rate Affect Mortgage Rates?
2. Does The Prime Rate Affect Mortgage Rates?
3. How Does The Prime Rate Change Mortgage Rates?
4. What Is A Prime Mortgage?
5. How Do Rising Mortgage Interest Rates Affect My Current Loan?