Understanding Why Mortgage Rates Fluctuate

When applying for a mortgage loan at the Lake of the Ozarks, one of the first things you want to know is what rates are available to you. Mortgage rates are constantly changing, but why? In today's blog, your Lake of the Ozarks mortgage lender addresses how mortgage rates are determined and what makes them move up or down.

How Mortgage Rates are Determined

While there are a variety of different factors that affect mortgage rates, the movement of the 10-year treasury note yield is said to be the best indicator of whether mortgage rates will rise or fall. Mortgages are typically packaged as 30-year products; however, most mortgages are paid off or refinanced within 10 years. The 10-year treasury note yield is the rate of return that you receive when you invest in this 10-year note. Essentially, you're loaning money to the U.S. government and they're paying you to do so. The yield is important, because as mentioned above, it is the benchmark that guides other interest rates, with the exception of adjustable rate mortgage which follow the federal funds rate. However, even the Federal Reserve watches the 10-year treasury note yield before making its decision to change the federal funds rate. Due to the fact that the 10-year treasury note is sold at an auction, it indicates the confidence that investors have in economic growth.

The Cause of Rates Rising or Falling

Mortgage rates fluctuate over time as a result of the interaction of the supply and demand for money in the economy.When the economy is growing, the demand for money increases and therefore, interest rates move upward. When economic growth slows or stops, interest rates move back down. One key factor is inflation. Inflation increases prices and deteriorates spending power in the economy, which in turn slows growth. For future homeowners, this means increased interest rates, making home buying more expensive. Economic activity is measured across the nation and reported to the Federal Reserve Board. They then take that information to determine whether they want to try to increase interest rates to control growth or decrease rates to spark growth and encourage borrowing. While the federal reserve doesn't directly set the interest rates, they can indirectly influence them by increasing or decreasing the money supply. In addition to regular monitoring by the feds, the financial markets establish benchmarks to understand where interest rates might be headed.

With that being said, the federally determined rates aren't necessarily available to everyone. Each borrower's situation is different, and other factors, such as your credit, also come into play. To find out what mortgage interest rates you could qualify for, contact the best mortgage lender at the Lake of the Ozarks at 573-746-7211. I'm here to work with you every step of the way!

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Michael Lasson

Senior Loan Officer

NMLS #: 493712

4655 B Osage Beach Parkway

Osage Beach, MO 65065

Direct:  (573) 746-7211

Cell: (573) 216-7258

Fax:(866) 397-0318

Email:  mlasson@fsbfinancial.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.