There are many factors to consider when shopping for a mortgage, but interest rates almost always take center stage. Interest rates fluctuate depending on many factors in the economy, including the prime rate, treasury bill rates, the federal fund rate, the federal discount rate, certificate of deposit rates, Fannie Mae-funded security rates, and Ginnie Mae-funded security rates.
Supply and demand can also have an effect. In a good economy, demand for mortgages is usually stronger, so the interest rate usually climbs. Conversely, if the economy is doing poorly, there is less demand for mortgages, so interest rates typically drop. This is good for the home buyer who has enough money for a down payment, despite the poor economy.
So why don’t all banks and mortgage brokers offer the same rates? While all lenders’ rates are based on the same factors, lenders can still set their rates wherever they want. They must cover their operating expenses, gird against the risks inherent in loaning money, and turn a profit, all while trying to compete with other lenders. See What Is APR for Mortgate Loans for more information.
When it comes to mortgage rates, the only thing you can depend on is that they will change. Sometimes they will change for the better and sometimes for the worse. But if you find a house you love, don’t pass it up because you are waiting for mortgages to drop another .25 percent. You can always refinance your mortgage if there’s a significant change.
Not everything happens quickly in the real estate market. It can sometimes take a few days from the time you read about a drop in interest rates until it’s reflected in the rates you are quoted. After all, it has to trickle down from the investors to the mortgage retailers to the lenders before it’s passed on to you.
Read Finding the Best Mortgage Loan Rate for links to resources.