rates for 40 year mortgage

One of the most common misconceptions is that if the Federal Reserve lowers interest rates, as it has done recently, that the mortgage loan interest rates will also decrease. This is absolutely wrong. The only kind of loans made by a decrease or an increase in Federal Reserve interest rates is the Equity Line of Credit. While this type of mortgage is directly affected by what the Federal Reserve is not your everyday 30-year mortgage is not fixed.

Instead, one has to look at the 10-year bond, to determine long-term mortgage rates. If the interest rate for borrowing is rising mortgage rates will rise if the bond decreases the interest rate for the 30-year mortgage will also go.

How does the connection up or down? What determines this?

If, for example, 10 investors to buy the 10-year bond with an interest rate of 3.78% and then the 11th Investors (usually these are large institutions) also wants to buy into the bond, investors have opted for a smaller interest rate, perhaps 3.77%. If 10 more investors want to buy the same bond then eventually one of these investors might have to work for 3.76%. As more and more people are buying the bond, the rate decreases, because sometime the next investors have looked at a smaller rate.

In this scenario, as more people buy bonds when they sell, the yield of the bond fell from 3.78% to 3.76%, a loss of 02%. If the connection were to close at this rate at the end of the day, then the rate on the bond would buy 02% reduced.

How does it work with the 30-year fixed mortgage? Now that the bond was issued by 02% then lowered the interest rate with which a bank may charge its borrowers will be reduced because now the lending institution borrowing money at a lower interest rate than the day before. If there is another case, 02% the next day the same, what would happen. The interest rate on the 30-year fixed mortgage is a bit further. It does not matter if you try to Oregon Home Loans, California Home Loan Mortgage Rates Tennessee Mortgage or, if the yield on the bond falls, the interest rate on the 30-year-old.

The opposite is also true if more people will sell bonds, the interest rate rises, so that mortgage rates also increase. Sometimes, during a trading session, so that many people are either buying or selling the 10-year bond, which leads to spike in one direction or the other, that the lender actually changes the interest rate in the middle of the day. In the morning it might have been possible for a borrower a loan at 5.625% only to have to work for the same loan later in the day at an interest rate of 5.75%.

Generally, a competent loan officer is able to lock in a rate before mid-day rate of change, but sometimes it can be very difficult to achieve, especially during the months when the bond is with a lot of volatility, as they recently did .

So why do investors buy and sell bonds?

If the stock market is strong and the economy is strong, institutions will be invested in the stock market, and thus stay away from the bond market. Especially when they have determined that they earn more than the 3.78% annual interest rate of the bond market. However, if they feel that the economy has stalled, large herd in the bond market to minimize market loses and lock in a secure interest rate on their investments.

In recent years economists have been predicting a recession and institutions were investing in the bond market, at the cost of borrowing, thereby reducing the 30-year mortgage rates. In fact, historical interest rates are very low, below 6% for the best borrowers, prices that are not already for several years.

My name is Allen Sayble, and I have a Loan Officer since 2001. I specialize in bad credit loans for home borrowers with less than stellar credit and income situations, but also with purchases and refinances for borrowers in good standing. I am based in Ashland, Oregon and can write Oregon Home Loans, or give you the best California mortgage loan interest rates. I am also qualified to do loans in Arizona and New Mexico.

At this point in the mortgage business, it is very important for each borrower to work with a professional Loan Officer. It is also best with a broker, like myself, who has access to all of the different lenders and not be restricted to a financial institution or bank. Please visit my website http://www.mortgageconsumer.com to learn valuable information about the lending business, so you are well informed about the loan and the most educated decision on your loan. You can also contact me at 541-324-9623.