What Causes Mortgage Rates To Change? Did you know that one or more rate changes per day is normal? Most people do not know that. Rate quotes can easily change when you call back later that same day. In the lending business, a rate change also includes a change in the point cost for the same rate. In other words, a rate can be no points in the morning, then later that day cost 1/4 point. That is a rate change to lenders. Did you also know that regular fixed mortgage rates are not directly affected by the Fed chairman directly does? Mortgage rates change primarily based on: 1) the perception of inflation, 2) times of uncertainty and 3) the movement of money in and out of the stock market. When a piece of news shows weakness or uncertainty in the economy, that helps rates fall. The opposite is also true. A drop in the unemployment rate, a rise in durable goods orders, a rise in the consumer confidence index--rates go up. These influencing factors present themselves all the time, many without warning, affecting mortgage rates instantly. There is no "delay". It doesn't take time to "filter down" like some people think. Reading the paper for quotes doesn't really work because the information is old by the time you read it. Radio, TV and billboards are not the answer because certain details are generally missing. They just want to get you on the phone. Competitive lenders can deliver nearly identical rates to each other. Most borrowers don't ask the right questions and focus only on the interest rate. A professional will always be competitive and deliver what is promised.
How Do You Get The Best Mortgage Rate? It is never about the best rate. It is about the best math. There is no other answer than that. So why isn't the lowest rate the best deal? First, lower rates come with more points and fees, but that's not the real issue either. There is a break even point to contend with when paying points and fees, tax deductions to figure out and your available cash. In the case of a purchase loan, points are tax deductible in the year that you pay them. That is good, but then again, so is the interest you think you are saving. With refinances, the points are usually only deductible over the full term of the loan. That could be 30 years, making the benefits to you and the break even point years down the road. So why do so many lenders advertise really low rates with all of those points and fees? Because they know most consumers look at the rate, not the math. That advertising strategy works really well. How about the lowest APR? Generally, the more points and fees you pay, the lower the rate and APR. True, but not the answer. Loan officers can take apart each rate and fee option to find out what the best math is for you, period. It only takes a few seconds for a professional to do it. As long as you qualify for various options, the final decision is yours. As always, if you need help or advice, please contact us.
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