The following is an article submitted by Mortgage Advisor Steve Nimmer.
It seems like every week we hear news about fluctuating mortgage interest rates. They're up, they're down, they remain unchanged...it's a lot to digest. Educating buyers about how mortgage interest rates work and how changes in rates can affect their loans in process can prove invaluable.
Many factors can influence mortgage rates. The role of the investor, bond prices/yields, other market-driven and policy-driven rates, and lender competition all play a role in determining mortgage interest rates.
Investments
Mortgages are one of the many investment products on the market today that investors "purchase" to realize a profit. Investors, such as Fannie Mae and Freddie Mac, buy mortgage-backed securities, which compete with other investment products in the marketplace and are influenced by the current Treasury bond yields. Mortgage-backed securities also provide fixed coupon payments to investors similar to bonds, but carry more risk and often better returns.
Other Rates
In addition, many other types of interest rates affect mortgage rates. Rates on bonds and securities go up in order to attract investors and the prime and LIBOR rates go down in order to attract borrowers. The Federal Reserve also sets specific rates to ensure stability and balance in the economy, and while the Fed does not set specific targets for mortgage rates, it does indirectly end up influencing them because these rates tend to move in the same direction as other financial interest rates.
Lender Competition
Lenders also compete against each other, balancing what their investors want to buy against what a homebuyer is willing to pay – and what the competition is offering.
Contact me today for more information about interest rates.
Steve Nimmer
Coldwell Banker Mortgage
A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga
It seems like every week we hear news about fluctuating mortgage interest rates. They're up, they're down, they remain unchanged...it's a lot to digest. Educating buyers about how mortgage interest rates work and how changes in rates can affect their loans in process can prove invaluable.
Many factors can influence mortgage rates. The role of the investor, bond prices/yields, other market-driven and policy-driven rates, and lender competition all play a role in determining mortgage interest rates.
Investments
Mortgages are one of the many investment products on the market today that investors "purchase" to realize a profit. Investors, such as Fannie Mae and Freddie Mac, buy mortgage-backed securities, which compete with other investment products in the marketplace and are influenced by the current Treasury bond yields. Mortgage-backed securities also provide fixed coupon payments to investors similar to bonds, but carry more risk and often better returns.
Other Rates
In addition, many other types of interest rates affect mortgage rates. Rates on bonds and securities go up in order to attract investors and the prime and LIBOR rates go down in order to attract borrowers. The Federal Reserve also sets specific rates to ensure stability and balance in the economy, and while the Fed does not set specific targets for mortgage rates, it does indirectly end up influencing them because these rates tend to move in the same direction as other financial interest rates.
Lender Competition
Lenders also compete against each other, balancing what their investors want to buy against what a homebuyer is willing to pay – and what the competition is offering.
Contact me today for more information about interest rates.
Steve Nimmer
Coldwell Banker Mortgage
(912) 604-3834
NMLS #: 186680
NMLS #: 186680
A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga
