With storm clouds hanging over the U.S. economy, Federal Reserve Chairman Ben Bernanke has gone on the offensive, slashing the federal funds target rate by 3 full percentage points—to 2.25 percent—since September.
But despite the central bank’s aggressive action, prospective homebuyers are left scratching their heads. After all, the average interest rate on a 30-year, fixed-rate mortgage has fallen by only about half a percentage point, to 5.85 percent, since mid-September. So what gives?
Here’s a look at the factors influencing today’s mortgage rates and a peek at where rates might be headed.
No. The Fed is responsible for setting the federal funds target rate, which is the interest rate that banks charge each other for overnight loans. “A bank’s balance sheet needs to balance every day,” says Ken Mayland, president of ClearView Economics. “If a bank needs funds, it will borrow. If it has a surplus, it will lend—at the federal funds rate.”
Mortgage rates are constantly changing and this makes it difficult when one is buying or refinancing a home. So how are mortgage rates determined?
There are really two pieces to mortgage rates. First, everyday there is a general market price for loans. This is how Wall Street or “the open market” prices mortgage backed-bonds.
Secondly, there is how your local lender/mortgage broker takes the Wall Street open market rates and offers them to the public.
The purpose of this article is to discuss how your local lender or bank determines the rate for your specific home loan. (more…)
What in the world are mortgage rates doing? Especially 30 year fixed loan rates?
As you can see in these below mortgage charts, home loan rates aren’t exactly stable right now.
In fact, this is the type of market you really should consider working with a Texas mortgage broker (like me!) as opposed to a retail bank. Why?
Because mortgage brokers have numerous banks to offer you and should 30-year loan rates go up dramatically during your home’s purchase or refinance-we can take advantage of lower rates by simple using a different bank. Plus mortgage brokers offer more types of loans than banks such as investment property refinancing or “NO PMI” mortgage. (more…)
Today’s Mortgage Rates: Jan. 30, 2009
