Mortgage rates are totally dependent on how the economy is performing. The mortgage rate comes in different varieties and the most popular is fixed rate loan. In case of the fixed rate, there is no fear of the rate fluctuating. If you are planning to take the mortgage loan, you need to enquire about the mortgage rate. The loan is actually used by the purchasers of property to raise the funds and to buy the real estate property. Mortage rate is generally influenced by the target cash or the official interest rate which is set by the Reserve Bank. The moment Reserve Bank changes the official rate, it tends to influence the overall expenditure of the economy. In fact, when expenditure is more than the production, there is inflation. How the rate is determined and how the rate moves is an absolute mystery.
When to Look Up For Fixed Mortgage Rate?
If you intend to hold your home for a long time, it would be great to opt for the fixed mortgage rate. The one who goes in for 7/1 ARM, they can get the rate locked for 7 years and there is nothing to worry about the fluctuation. The rates are quoted in the 1/8% like 4.125%. It is usually the 4.4258% which is the APR or the Annual Percentage Rate.
The Fluctuation of the Mortgage Rates
There are too many factors influencing the fluctuation of the rates. The 10 year Treasury Bond Yield is the finest indicator. Here the 20-30 years fixed rate mortgage is paid within the tenure of 10 years or so. The payment is done by selling the home. The Treasuries are in fact backed by the credit and full faith of the US. Treasuries act as the bench mark for the other kinds of bonds. So, when the rate of the T-Bond or the Treasury bond goes up, the mortgage rates also go up. Besides this, there are several reports on the fluctuation of the mortgage rates.
Other Important Factors Influencing the Mortgage Rate
Mortgage rate is also affected by various other factors. They include the GDP or the Gross Domestic Product, the Consumer Price Index and Consumer Confidence, the Home Sales. If the economic news is good, the rates will go up and vice versa. If the stock market rises up, the rate of mortgage will skyrocket. The fluctuation in the rate is also dependent on the Federal Reserve which tends to adjust the Federal Funds Rate. The rates are sure to rise under inflationary economy.
How to Protect Oneself from the Rising Mortgage Rate?
A lot many people are worried about the fluctuating mortgage rates. When the mortgage loan is processed, the broker will tend to lock the rate to protect you from the rising mortgage rates. With most of the lenders, these locks may go between 15 and 45 days.
The interest rate on the loan gets adjusted and is influenced by various factors. Never be swayed away by the par value. If one is doing the LTV or high loan to value rate and the credit score is sound, there will be adjustments on the rate.