Today’s Mortgage Rates

Shop the Lender, Not the Rate

If you want the best mortgage interest rate, find a lending professional who is actively watching the market and knows when to lock you in at the lowest rate.

You will get different answers on interest rate quotes depending on what time of day and who you are asking because rates are constantly in motion due to a number of outside forces.

To feel confident that you are working with the right lender who can provide you with the lowest rate for your unique lending scenario, ask a few of the questions on this page and see if their answers add up.

How Are Mortgage Rates Determined?

Mortgage rates are determined by the general economic climate and the risk your mortgage loan presents to a lender.

The secondary market is comprised of investors who buy the loans made by banks, brokers, lenders, etc. and then either hold them for their earnings, or bundle them and sell them to other investors. Fannie Mae and Freddie Mac are two of the biggest secondary mortgage investors in the world.

When the secondary market sells the bundles of mortgages, there are end investors who are willing to pay a certain price for those loans. That market price of those Mortgage Backed Securities (MBS) is what impacts mortgage rates.

Typically, investors are willing to accept a lower return on mortgage backed securities because of their relative safety compared to other investments. This perception of safety is due to the implied government backing of Fannie Mae, Freddie Mac, and FHA.

The media often implies mortgage rates are based off the 10-year US Treasury Note, which is not exactly accurate. While the 10-year Treasury Note has been known to trend in the same direction as Mortgage Bonds, it is not unusual to see them move independently.

What Factors Influence Mortgage Backed Securities?

1) Inflation

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. Since a mortgage is a long-term – usually 30 year – deal, inflation can dramatically eat into the profits of a mortgage lender. Thus the sensitivity of mortgage rates to inflationary factors.

As inflation increases, or as the expectation of future inflation increases, rates will push higher. The contrary is also true; when inflation declines, mortgage rates decrease.

2) The Federal Reserve

The meltdown in the mortgage market and world economies lead many investors to shy away from the risks associated with MBS, which is why the Fed had to step in and basically assume the role as the sole investor of mortgage bonds

3) Unemployment

Decreasing unemployment will suggest that mortgage rates will rise. Typically, higher unemployment levels tend to result in lower inflation, which makes bonds safer and permits higher bond prices. In fact, the Fed is currently using employment data as a benchmark for when to raise rates.

4) GDP

GDP, or Gross Domestic Product, is a measure of the economic output of the country. High levels of GDP growth may signal increasing mortgage rates.

5) Global Events

Unforeseen events related to global conflict, political events, and natural disasters will tend to lower mortgage relates. Anything that the markets didn’t see coming causes uncertainty and panic. And when markets panic, money generally moves to stable investments (bonds), which brings rates lower.