Las Vegas Mortgage Call Casey Moseman 702-271-1274

Personal and Professional Service to Get the Best Loan for you

Up or Down – What Really Changes Mortgage Rates?

Mortgage Rates & What Moves ThemIf you're buying a home, playing the interest rate market like the stock market isn't what you should be doing.  However, knowing what causes mortgage interest rates to move, up or down, at least helps you to understand what's happening in the markets and why.  Many believe that the Federal Reserve's manipulation of the Prime Rate directly affects mortgage rates.  This really isn't the case.

You may notice that, with exceptions of course, in most cases when the stock market is rallying, mortgage rates are going up.  When the stock market is dropping, rates are doing the same.  There are very sound economic and market factors causing these moves.  There is always a competition for investment money.  Investors are watching the various markets and moving their money to where they feel it will do best in returns, with safety always a concern.  Generally, bonds are less risky investments than stocks.  And mortgage-backed bonds are where investments influence interest rates directly.

When plenty of money is available for mortgages, interest rates go down, as there is a good supply of money for loans.  When money moves away from bonds and into stocks, less is available for mortgages, thus we get higher rates in competition for that smaller pool of money.  So, when you see the stock market rising, going great guns, it really isn't good for mortgages.  Investors move their money into stocks, taking it out of bonds and cutting the supply available for mortgages.  When the market takes a dive, investors flee to the relative safety of bonds, we have more mortgage money available, and rates go down.

%d bloggers like this: