Purpose
Refinance Purchase Home Equity

Loan Type
Fixed ARM Interest Only FHA

Amount

State
Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District Of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming

Display Mortgage Rates &
Refinance Rates in your State

What Causes My Mortgage Interest Rate To Change?

By Jim Micheals

Many people ask themselves, ‘what causes my mortgage interest rates to change?’. There are a couple of answers to this question which indirectly or directly affect the way rates fluctuate on a monthly or yearly basis. Here are some of the causes:

Prime Rate

The Federal Reserve ‘cut rates’ have the ability to cut the Fed Funds rate, amongst other things. These specific cuts directly affect the mortgages cut. The different type of rates include; 6 month CD rate, Fannie-Mae-Backed Security, Treasury notes, Treasury bill, 11th District cost of funds, Federal funds, Federal Discount Rate and Ginnie Mae-back security rates. All of these are offered based on their own criteria; prime rates are only offered to customers who are considered ‘loyal’ or their best consumers.

Treasury bill rates are usually short-term and often used by the U.S. Government to finance their debt. These are also called T-bills.

What Interest Rates Are Based On

For those who are asking, “What causes my mortgage interest rates to change?’, interest rates are often determined based upon supply and demand. If a certain loan has a high demand, than the interest rates will be increased. The entire concept is based off the fact that there are more buyers. The seller can in return increase the price (which means higher interest rates). It is basic Economics. The same effect would occur if the demand for the loan decreased; so would the interest rate.

Economy Expansion

When the economy was at it’s peak about 5-10 years ago, mortgage companies and financial institutions were able to charge higher interest rates. When the economy is slowing (such as in the case of the current economic recession), than the interest rates are decreased. A slowing economy is great for borrowers and those looking to invest in a home. So the next time you ask yourself, ‘What causes my mortgage interest rate to change?’, just know that in the end, mortgage rates move in the same direction as interest rates.

Related posts:

1. Why Do Mortgage Interest Rates Change?
2. What Causes Mortgage Rates To Change?
3. Why Do Mortgage Rates Change?
4. When Do Mortgage Rates Change?
5. What Criteria Is Used To Determine A Change In An ARM Mortgage Loan?