A Primer On Mortgage Interest Rates

When the economy is at its worst, mortgage interest rates are usually at their lowest.

Why? When there is little economic growth, people move into bonds. Bond dividends are fixed. Bond prices vary on demand. The higher the price of the demand, the lower the percentage of the yield (dividend).

When the world is shakiest, investors rush to safety, which usually means investing in U.S. Treasury bonds.

If the U.S. Treasury buys more bonds, it increases their price and reduces their percentage yield, a factor that causes lower mortgage interest rates.

QE1 lowered mortgage interest rates. QE2 did not. Will there be a QE3?

Here are more things that affect mortgage interest rates:

The pipeline: Mortgage lenders constantly evaluate the amount of business coming in and adjust their rates accordingly. When they have more business than they can comfortably process, they raise rates to stem the flow. When they want to beef up their business, they lower rates to bring in more loans. That’s one reason rates differ from lender to lender.
Lender efficiency: Like all businesses, some lenders are better at originating mortgages than others and can operate on smaller margins. That translates to lower rates for their customers.
Lender perception of risk: Some lenders charge more to do loans they consider less desirable. For example, jumbo loans, loans on certain types of properties or in certain parts of the country. Others evaluate risk differently.

Read more: http://community.nasdaq.com/News/2011-08/what-moves-refinance-mortgage-rates.aspx?storyid=91011#ixzz1VKiUi29J

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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