What Causes Mortgage Rates To Change?

I’m on a lot of mailing lists, which usually get sold and result in my getting a ton of spam. Most of it is effectively filtered out, but sometimes “relevant spam” filters through. Here’s an interesting example from a mortgage company.

Did you know that one or more rate changes per day is normal? Most people do not know that. Rate quotes can easily change when you call back later that same day. In the lending business, a rate change can also include a change in the point cost for the same rate. In other words, a rate can be no points in the morning, then later that day cost ΒΌ point. That is a rate change to lenders. Did you also know that regular fixed mortgage rates are not directly affected by what the Fed chairman Ben Bernanke does?

Mortgage rates change primarily based on:
1) the perception of inflation,
2) times of uncertainty and
3) the movement of money in and out of the stock market–that’s it.

When a piece of news shows weakness or uncertainty in the economy, that helps rates fall. The opposite is also true. A drop in the unemployment rate, a rise in durable goods orders, a rise in the consumer confidence index–rates go up.

These influencing factors can present themselves all the time, many without warning, affecting mortgage rates instantly. There is no “delay”. It doesn’t take time to “filter down” like some people think. Reading the paper for quotes doesn’t really work because the information is old by the time you read it. Radio, TV and billboards are not the answer because the details are always missing. They just want to get you on the phone. Competitive lenders can deliver nearly identical rates to each other. Most borrowers don’t ask the right questions and focus only on the interest rate. A professional will always be competitive and deliver what is promised.

To really know about your mortgage I strongly recommend How to Save Thousands of Dollars on Your Home Mortgage. My dog-eared copy is currently vacationing in Egypt with a friend. Its not difficult to understand and is a great resource.

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