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Why Do Mortgage Rates Change?

By Jim Micheals

Understand the secrets why mortgage rates change daily and what you can do to get the best rate. Here are the mortgage rate tips only the experts know.

If you have ever sought out quotes on mortgage rates you may have noticed that the rates can change daily. A good deal today can be gone by tomorrow. Many people do not understand why mortgage rates change or when they should act to find the best deal.

Why do mortgage rates change?

Mortgage rates are not determined by mortgage lenders themselves, but by the basic principles of supply and demand. This elemental marketing axiom controls whether or not lenders will need to raise or lower their rates, and it can change every day. When the demand for mortgage loans is high, lenders can raise their rates and demand a higher price for their services. The reverse is also true. When demand is low, lenders who supply mortgage loans are more likely to lower rates in order to encourage more people to buy.

Other factors of mortgage rates.

Supply and demand may be the main element for mortgage rate change, yet it is hardly the only one. Other outside forces can determine what banks will charge for their rates. These forces include the rates set by larger banks and institutions. One such factor is the London Inter-bank Offered Rates, or LIBOR. This is the rate the a select group of banks in London offers each other for deposits. Many adjustable mortgage rate lenders base their numbers on this scale. Other important factors are the U.S. Treasury Notes yield curve and the Cost of Savings Index, or COSI.

How can you get the best mortgage rate?

The best way to make sure that you get a good rate is to wait until the time is right. Times of economic growth tend to be when there is the most competition for mortgage loans. This can drive the rates higher as banks seek to make more money. Periods of economic downfall, however, can send lenders scrambling to make loans. With the right timing, a person can walk away with an incredibly low mortgage rate.

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3. When Do Mortgage Rates Change?
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5. What Have Mortgage Interest Rates Changed?