Mortgage rates go up and mortgage rates go down. Mortgage rates can, and often do, change daily and evenly hourly. Why does this happen?

In order to understand why mortgage rates fluctuate, it is important to understand the simple economic theory of supply and demand. This theory is more of an economic model. Supply and demand defines price determination within a specific market.

Supply is simply defined as the specific quantity of a particular product. Demand refers to the desire for that same product (how much do people want it). The price of that product directly links supply and demand together.

Generally speaking, the price of a product increases as demand increases. Manufacturers and retailers know that they can earn a greater profit by charging a higher price because many people desire that product and are willing to pay higher prices for it. The opposite is also true. As demand decreases, the price of that product also decreases.

Supply and demand affect the real estate market on a daily basis. As the demand for mortgage loans increases, interest rates on all types of mortgage loans increases as well. When the market slows down and people are not looking to get credit as much, interest rates are forced down. Mortgage companies, banks and other lenders are compelled to drop interest rates in order to stay competitive when the market is not as busy.

There are other factors that affect the going mortgage rate as well. The prime rate affects interest rates. Prime rates are offered to consumers who have the best credit. Traditional interest rates are taken from the prime rate.

Treasury bonds are said to affect interest rates a great deal. In fact, economic experts say that the best indicator of mortgage rates is the 10-year Treasury bond. The 10-year bond is the most telling because the average 30-year traditional mortgage is usually either refinanced or paid off in 10 years. Thus, it is almost as if the 10-year Treasury bond and Mortgage-backed securities (investment properties) face a bitter competition. Interest rates are affected when 10-year Treasury bonds and MBS compete head on.

There are many factors that affect the going mortgage rate. Mortgage rates can fluctuate daily and can even change on an hourly basis. The important thing is to carefully watch the market to determine when the best time is to buy, sell or refinance.

Related posts:

  1. How Will the Bailout Affect the Direction of Mortgage Rates?
  2. The Basics of 30 Year Mortgage Rates
  3. Obtain Mortgage Rates At Affordable Rates.
  4. 30 Year Fixed Mortgage Rates The Basics
  5. The Inexpensive Mortgage Rates At Mortgage Rates Calgary.
  6. The Case for Rising Mortage Rates
  7. Home Loans Like The Mortgage Rates Toronto Are The Best.
  8. Borrow Cash With Ease At The Lowest Mortgage Rates
  9. Jumbo Mortgage Rates – High Interest Ahead
  10. Choosing Popular Mortgage Products to Meet Your Needs
  11. Top Instructions in Getting the Best Mortgage Rates.
  12. Find Columbus Mortgage Rates
  13. How Working With A Mortgage Centre Can Help You Get Better Mortgage Rates
  14. SunTrust Mortgage Rates Are Low – Are Service Standards?
  15. Mortgage Refinancing Vancouver Gives The Perfect Inexpensive Home Loans To Their Clients.