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Why Causes Changes in Mortgage Interest Rates?

By Jim Micheals

Secrets to why Mortgage Interest Rates are constantly changing, why they are changing and how you can get the best rate.

Mortgage interest rates are constantly changing due to many related factors. Money for mortgages comes from many different institutions including capital markets (where investors purchase instruments of debt) bonds, and consumer trends.

Mortgage Backed Securities (MBS)

Changes in mortgage rates occur when the mortgage backed securities sell on the market for either higher or lower values than the original price. Many factors influence why these bonds will sell at different rates. The Federal Reserve issues a report weekly showing how bond rates fluctuate and why. Institutions that sell bonds are trying to get investors, and in the process they are offering products that have varying levels of risk and return. Each institution is trying to compete with other bond issuers and therefore, must use competitive rates compared to other industries using bonds.

Market Influencing Factors Upon Mortgage Interest Rates

The markets are constantly changing and barely hold steady at a daily rate let alone the weekly rate the Federal Reserve observes and reports upon. Weekly changes in mortgage interest rates are generally steady but rely on the other markets to remain steady as well. Recently the economic crisis had a great impact upon the factors contributing to rate changes. The collapse of many bond related industries meant that the sellers of mortgage rate securities saw a decline in interest rates. This decline lowered the amount of interest bond purchasers had in the mortgage industry.

What You Can Do

Mortgage interest rates are changing daily and you should do some research and wait for the best interest rate if looking for a first or second mortgage. One afternoon the interest rate could be close to 4% and the next climb close to 6%. It is possible to lock in the lower rate and save yourself some serious money when purchasing a new house or refinancing the one your in.

Related posts:

1. How Do Bonds Affect Mortgage Interest Rates?
2. Is A Fed Rate Cut Really Good News For Mortgage Rates?
3. Are We In An Economy Where Low Mortgage Rates Don’t Matter?
4. How Often Do Mortgage Rates Change?
5. How Do Treasury Bonds Affect Mortgage Rates?