Fishing for the Best Mortgage Interest Rate in a Sea of Change
A Home Buying Article Contributed by Robert Scalia
Fishing for the Best Mortgage Interest Rate in a Sea of Change
You think you've found the best mortgage interest rate one day.
Then you flip open the financial pages again the next day and find that the rate has dropped by a couple of percentage points. So you wait. You check back again in a couple of weeks and realize they have shot up again. Now you wish you would have taken that mortgage interest rate when you had the chance.
And then the mortgage interest rate just drops again without warning.
You might then stop and ask yourself how you can even think about nailing down the best mortgage interest rate when they often seem to change from day to day. But if you think you can just step into a mortgage broker or lender's office and ask him this very question, you might be in for a little surprise.
The simple answer is that no one can predict exactly where mortgage rates will be a day, week or month from now. And asking your financial financial adviser or expert why mortgage rates change all the time is not unlike a young child asking his mother why the sky is blue. This is the way things are, so you just have to learn to live with it.
What is It That Causes Mortgage Interest Rates to Vary So Much?
The reality of the matter is that mortgage interest rates change with other interest rates.
Everything from prime rates to treasury bill rates are fair game and each will have a distinct effect on the mortgage rate you see in the papers. And while no one can predict the future, learning what causes these different rates to rise or fall can give you a better idea of what mortgage interest rates will be at it a month or a year.
What are Some of the Basic Market Rates That I Should Be Concentrating on That Might Provide Insight into Where the Mortgage Interest Rate is Heading?
When it comes to mortgage interest rates, the prime rate is usually a good place to start.
This is the rate that is offered to a bank's best customers. That means this is the lowest rate out there, so don't expect you mortgage rate to be any less than that. Think of it as rock bottom for the real estate industry.
Treasury bill rates are short-term debt instruments used by the U.S. Government to finance its own debt.
Treasury Notes are the exact same thing but work on a little bit of a longer term basis. Instead of lasting for six months, they might be offered from anywhere to five to ten years.
Federal Funds Rate is the rate banks charge each other when making overnight loans. And lastly, federal Discount Rates are what the New York Fed charges to its own member banks. If you can get a handle on all these various rates, you will start to see patterns in how these affect you own mortgage interest rate.
