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Why Do Mortgage Rates Fluctuate?

By Bob Redtree

Secrets of Why Mortgage Rates Fluctuate

When watching the financial news daily, one will often notice that there are announcements of mortgage rates fluctuating. The changes in mortgage rates sometimes occur slowly. At other times, the changes in mortgage rates occur more quickly. The changes are not random. There are some specific reasons why mortgage rates fluctuate. The following article will discuss the issue of why mortgage rates fluctuate.

How Much It Costs the Bank To Loan Money

Mortgage rates will go up if the Costs of Funds Index (COFI) indicates that banks have incurred more expense in the process of providing loans. Also, there could be changes in mortgage rates depending on what the London Interbank Rate (LIBOR) is or depending on what the specific interest rate is on the money that banks loan.

Consumer Choices and Bond Prices

There is a role that consumers play in determining why mortgage rates fluctuate. For example, if consumers decide that they want to predominantly put their money into certificates of deposit as opposed to lower interest savings accounts, that would cause mortgage rates to go up. Also, if the price of mortgage securities goes up, mortgage rates will go down. If the price of mortgage securities goes down, mortgage rates will go up.

Economic Factors

Economic factors such as the unemployment rate and the home foreclosures rate are reasons why mortgage rates fluctuate. For example, if the unemployment rate rises and if there is a corresponding rise in the home foreclosure rate, banks will then want to charge higher mortgage rates to compensate them for the losses that they will experience due to foreclosures. On the other hand, if the unemployment rate goes down and if there are not as many home foreclosures, banks will charge lower mortgage rates.

Related posts:

1. When Do Home Mortgage Interest Rates Fluctuate The Most?
2. Why Do Mortgage Rates Fluctuate?
3. What Causes Home Mortgage Interest Rates To Fluctuate?
4. What Causes Mortgage Rates To Fluctuate?
5. Soaring Inflation Could Mean Higher Mortgage Rates

One Response to “Why Do Mortgage Rates Fluctuate?”

1. Carolann Crady says:

   May 2, 2010 at 2:30 am

   With mortgage rates the way they are have you looked into? The deals are cheap right now with all the foreclosures and way below market value. Something to think about eh?