Have you ever wondered why mortgage rates seem to increase or decrease one day to the next? One day, you see 4% and the next day, 4.25% - what gives? It’s a question that gets asked on a pretty regular basis.
There are several factors that affect mortgage rates. Sometimes it almost feels like when the weather changes, so do mortgage rates. And actually, that’s not out of the question – devastating weather events such as hurricanes have affected interest rates.
The key factors, though, that affect interest rate movements are things that would make sense to most people. For example, how well is the overall economy doing? Are home sales up or down? Has the Federal Reserve made any public statements on interest rates? Even movements in the stock market can cause interest rates to rise and fall.
But the number one factor that mortgage experts point to as causing rates to change is the bond market. When the experts are talking about the bond market, they are referring to U.S. Treasury bond sales of government debt. You’ll often hear in the mortgage business that interest rates follow trends in the 10-year Treasury bond. Meaning, if investors buying U.S. government bonds are paying a higher interest rate, mortgage rates tend to follow. This relationship has proven to be true over time.
Even if you understand why interest rates move, how do you know if current rates are competitive? One way to do some simple comparison shopping is through the websites of well-established banks in your area.
The newest – and simplest – option, however, is a tool provided by the Consumer Finance Protection Bureau (CFPB). When you select your state, current rates and how many lenders are offering them show up in an easy-to-understand, graphical format. This allows you to check and rates you’ve gotten from specific banks against what is being offered by most lenders in the state. The site also offers an interactive tool that allows you to compare the costs of two interest rates over five and 30 years and provides next steps for getting the best rates on your mortgage.
And always remember, regardless of how rates go up and down and where they are currently, your credit score impacts the interest rate available to you. Check out our previous blogs on what affects your credit score and how it can impact your ability to purchase a home.
Home matters – thank you for checking in with us this week.
