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There are several indexes on which mortgage rates are based:
- The Prime Rate is used by lenders for corporations and for their credit-worthy
applicants. It is very stable and tends not to differ from bank to bank. The
Prime Rate is used to predict the direction of rates, and the activity of
consumer loans often follows that of this index.
- U.S. Treasury Security Yields is an average of monthly rates during the
length of a one year U.S. Treasury security that is often used to set adjustable
rate mortgage and is published yearly by the Federal Reserve Board.
- The 11th District Cost of Funds is also used to set adjustable rate mortgages
and will often follow the same direction as the average of a one-year U.S.
Treasury security. Monthly, the 11th Federal Home Loan Bank District, which
includes California, Nevada and Arizona, publishes its weighted average mortgage
rate for the prior month.
- Federal Funds Rate is set by the Federal Open Market Committee and is the
mortgage rate on funds one bank lends to another overnight. This index affects
inflation and economic growth, and is decided on by the Federal Open Market
Your mortgage rate is perhaps the most important factor of your loan and can often decide whether or not you will be happy with your loan in the long run. Current mortgage rates are widely considered to be remarkably low and locking in a low mortgage rate can save you money.
It can be very helpful to understand mortgage rates and indexes if you are interested in finding a loan, especially if you are looking in to adjustable rate loans. Apply online today and contact a lender about current mortgage rates and the effect they will have on your loan.
There are many different components to understand when you are trying to find the right loan. How long of a repayment period do you want? Do you qualify for a fixed rate? Is an adjustable rate better suited to your needs? Understanding the factors that create your loan can take the stress out of the decision making process and keep you from taking terms will eventually cost you money. Fill out our free short form to contact up to four lenders about your loan.