Home mortgage interest rates


Home mortgage interest rates depend on supply and demand. If the demand for credit increases so do the rates.There are simply more buyers than sellers. When the demand for credit decreases, the mortgage interest rates decline, since there are more sellers than buyers. In a robust economy, there is more demand for credit, and hence mortgage interest rates increase. In a declining economy the opposite is true.

The Great Recession of 2008 has been one such event that changed the direction of home mortgage interest rates for a long time. The mortgage rates declined due to the economic policies of the Feds. The Feds injected liquidity in the market place via buying back billions of mortgage backed securities on which they get paid decent interest rates and earn money.  This in turn lowered the demand on current mortgage rates.  That further lowered the mortgage interest rates to lowest  levels in 60 years.  Many savvy home buyers scooped up and refinanced. The lending was harder but it was well worth the efforts.

Bad economy : Lower mortgage interest rates

Good economy: Higher mortgage interest rates.

Inflation plays an important part in interest rates. When the economy heats up, demand increases and rates start moving up in tandem. Therefore, the Federal Reserve increases borrowing costs for short term borrowing, that eventually indirectly changes mortgage interest rates, to keep inflation in check.

The Fed policy changes the climate for ending and they raise the short term interest rates by increasing the  direct lending rates. The lenders are now forced to raise their rates and the real estate markets slow down. This is what happened between 2003 and 2005 when Feds raised lending rates every six weeks of so and ultimately killed the overheated real estate market in August 2005.

Higher rates create inflationary trends. Inflation results from prices of goods and services increasing as more money chases fewer goods. A strong and robust economy increases more demand and that spirals real estate values. Mortgage rates tend to move in the same direction as interest rates.

How to get lowest Current mortgage rates ?

Home mortgage interest rates  marketplace is dynamic  in nature where everyday fluctuations change these mortgage interest rates. These rates depend on bonds and the direction these bond markets are trading. The ten year bond yield is what these mortgage interest rates work off. If you watch these 10 year bond yields and  economic factors changing these yields, it will empower you to figure out the myth of these mortgage rates.

So how can you get best possible home mortgage interest rates? When the economy is slowing down or in recession and the Feds have lowered the general overnight rates which in turn change the bond yields and than its time to aggressively shop for bargain rates.  These rates present a one time opportunity to lock in fixed mortgages for 30 years and should not be missed if possible.

One should not forget mortgage interest rates depend on the supply and demand as well. The supply/demand for mortgage rates may be different from the supply/demand for interest rates. This might sometimes result in mortgage rates moving differently from other rates.

Alliance offers one of the lowest rates on the net. Please take a moment and compare our rates and fees with you local companies.