It requires sitting still for some economic jargon. But take the time and you’ll emerge with a much better understanding of how interest rates affect the mortgage industry – and how both will.
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Mortgage-Backed Securities and Mortgage Rates. Now that you know how individual mortgages are put together to make up a bond, how does that affect rates? mortgage rates are directly affected by the purchase and sale of mortgage bonds. The more mortgage bonds that are being sold, the lower the yield has to be in order to get someone to buy.
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Mortgage Backed Security prices directly impact interest rates. Mortgage backed securities or mortgage bonds are a market just like the stock market. So, when economic news affects these mortgage bond prices, home loan rates are directly influenced. One of the biggest influencers of this market is inflation.
This in turn affects the mortgage rates. Your credit. While this does not have an effect on mortgage rates at large, how strong your credit and financial situations are will have a large impact on the kind of interest rate you will receive. If you have a spotty credit history you are considered a higher-risk borrower, so the lender is going to.
Mortgage interest rates are not dictated by the government. They are determined by individual lenders. Lenders set their rates to offset the risk of borrower default, and to build in a profit.
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· The Most Important Factors that Affect Mortgage Rates. Mortgage interest rates have a very significant impact on the overall long-term cost of purchasing a home through financing. On one hand, mortgage borrowers are seeking the lowest possible rates; on the other, mortgage lenders have to manage their risk through the interest rates they charge.
Why do Mortgage Rates Change? – MoneyWise – Why do Mortgage Rates Change? What Factors Affect Fixed and Variable Canadian Mortgage Rates? There are many factors that influence the health of the economy; unemployment, inflation, consumer confidence and the housing market, just to name a few.
If inflation is expected to decline for the foreseeable future, you can bet that mortgage rates have some room to fall. Conversely, an outlook which suggests higher inflation ahead will see mortgage rates rise, sometimes very quickly. Also, a poor economic climate affects mortgages much more profoundly than Treasuries.
Fed rate hikes ripple through mortgage markets. Here’s what to expect. Find out how the Federal Reserve’s latest interest rate hike affects rates on different types of mortgages.