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Mortgage Rates Vary and may change serveral times daily.
Why does this happen?
Well the reasoning behind the rate
change can be varied but here are several market conditions
to watch out for when getting ready to lock into
a rate. First, What is the federal reserve bank
doing. FedRes.
They set the monetary policy in America. This means
that they are in charge of the way the federal government
lends money and what they charge on that capital to
those who borrow. Although they commonly are not involved
in lending to individuals they do grant funds to banks,
mortgage lenders and other capital groups. They charge
a funds
rate. This is the percent that is charged on the
money borrowed. So when you hear that the fed has lowered
or raised the mortgage rates, they actually did not
change them respectively they changed what they
charge the lending company for borrowing the capital
they lend to mortgage borrowers. So in turn the mortgage
broker/ lender increases or lower mortgage rates to
make up for the change in what they are paying to borrower
the capital lent. Sometimes the mortgage rates may change
but there was no change in the funds rate. This can
happen because of either statements or changing
future or current market conditions. The reserve board
of the Federal Reserve is made up of many "Governors"
across the country. A "governor" is a person
in charge of respective state boards and the chairman
of the federal reserve is in charge of all governors
and the one who determines final monetary policy. The
rates may change based on any statement that suggest
a change in monetary lending policy.
The 10yr Bond and rate changing.
Mortgage Company and lenders tend
to go to the open market for capital to lend. As with
most open market competition there is varied products
that those that have capital invest in. Remember investing
in mortgages usually is a very stable investment with
a almost guaranteed return. Most individuals will pay
on mortgages before paying all other debts. Competing
for this investment dollar is the 10 yr treasury bond.
Also a very stable return investment. So, in an open
market competition the bonds yield (what it pays) usually
correspond to mortgage interest rate. If the yield on
the 10 year treasury bond goes down then the rates on
the mortgages tend to more down an vise versa. So keeping
an eye on the bond movement is a great way to help determine
were market rates are moving.
Stock markets roll on Mortgage rates
This a little more abstract than the
previous two affects on interest rates. The large institutions
and individual capital invested in the stock markets
all want a positive return on capital. It is good assumption
that most that invest goals are to make a profit and
not lose capital. Sp when the stock market begins to
decline many investors try and cut losses and move to
a more stable investment like bonds. So, as in the previous
bond explanation, as more people invest in the bond
the prices increase and the yield decreases. Yield decrease
usually results in lower rates. This is NOT a
golden rule. It is just a possibility. If you look at
it often rates change when the stock market goes down
but IT can also change when it goes up. Sometimes the
market rises because a massive influx of capital. This
capital can spread across all markets even the treasury
bonds. So the market can up and bonds can be in high
demand. Watching the stock market's movement is not
the best way to predict the movement of rates but it
can give you a good idea if you know the reasons the
market movement occurs.
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