Mortgage rates are based on certain indexes. If you qualify for a fixed rate loan, you probably will only be interested in the current state of such indexes, since your interest rate will stay constant throughout your term. However, borrowers will adjustable rates will also be interested in the stability of such indexes.
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Mortgage rates are based on certain indexes. If you qualify for a fixed rate
loan, you probably will only be interested in the current state of such indexes,
since your interest rate will stay constant throughout your term. However, borrowers
will adjustable rates will also be interested in the stability of such indexes.
Several indexes influence mortgage rates, and one of the following may be the
index on which you rate is based:
- The Prime Rate is generally extremely stable, and lenders usually use this
index to determine mortgage rates for their most creditable applicants, corporations
and large businesses. The Prime Rate usually stays the same from bank to bank
and is often used to predict future mortgage rate trends. Consumer loan mortgage
rates usually rise or fall along with this index.
- U.S. Treasury Security Yields is determined by the Federal Reserve Board
and is published once yearly. This index is calculated by taking the average
of the monthly rates from a one year U.S. Treasury Security. Averages of the
monthly rates from three and five year securities are also published. U.S.
Treasury Security Yields are used to determine adjustable mortgage rates.
- The 11th District Cost of Funds involves a weighted average of mortgage
rates from the 11th Federal Home Loan Bank District, which is comprised of
the states of California, Nevada and Arizona. This index is also used to calculate
adjustable mortgage rates.
- The Federal Funds Rate is determined by the Federal Open Market Committee
and has a large impact on inflation and economic growth. Because of its influence
on the economy, the Federal Funds Rate is changed only with great care. If
taken to high or too low it could actually choke economic growth. This rate
is most often used by banks when lending to other banks overnight.
Low mortgage rates have been encouraging many homeowners to take out an equity loan and spurring many renters to switch to owning. When taking out a loan it is good to understand your mortgage rate and where such mortgage rates come from, especially if you have an adjustable rate loan, which will rise and fall as your repayment term goes along.
Trends in mortgage rates are of interest to anyone interested in finding a loan to finance a new home, home improvements or a new vehicle. There are several ways to monitor mortgage rate trends. Learning information about mortgage rates and how they are determined can help you understand why current mortgage rates are so low and also to predict whether or not mortgage rates will rise in the near future. Such predictions, though far from foolproof, can be used to help you decide whether or not now is the time to obtain your loan. Fill out our free short form to contact up to four lenders about your new mortgage and rate.