If you plan on owning a home one day, then it’s important to know as much as possible about current mortgage rates. Put simply, the more you know, the more money you can save in the future. With that in mind, here are some of the most important things to know about home mortgage rates.
First of all, let’s outline what a home mortgage rate is. If you want to buy a home and can’t afford to pay for it completely with cash (something that most of us cannot do), then you will need to borrow money from the bank. The cost of borrowing this money is called the home mortgage rate, which is the annual rate of interest. When paired with the principal amount of money that you owe, this home mortgage rate determines your monthly payment.
Obviously, home mortgage rates are important. So how can you make sure that you’re getting the best possible rate for your home? First, let’s look at what drives mortgage rates lower. In the United States, mortgage rates are determined by the current market rate of Mortgage Backed Securities (MBS), which are traded just like any other stock or commodity. The greater demand there is for MBS, the lower the mortgage rates are.
This also explains why a lot of people confuse mortgage rates as being determined by the Federal Reserve, or by the yield on 10-year Treasury Bonds. While these do not directly affect home mortgage rates, they do show the various market mechanisms that effect MBS. For example, when the stock market is down, more and more people try to invest in less volatile markets, like MBS. This means that the price of mortgages goes down. On the flip side, when inflation is high, investing in MBS is not a good decision, which means that demand decreases and home mortgage rates increase.
By understanding the market mechanisms that affect home mortgage rates, you can effectively protect yourself in the future from spending thousands of unnecessary dollars on a mortgage that is less than ideal.
Alternatively, you can find plenty of information on the topic online. This eliminates the need for your own analysis. When looking for information, be sure to look for a reliable and trustworthy site, preferably with posts from people who are experts in the field of mortgages. By entrusting your loan into the hands of qualified experts, you avoid having to do your own spotty analysis of the current economic situation.
Ultimately, this saves you time and money, which are two of the most valuable commodities we have in life. It also means that you’re not trying to pick out things in the market that experts have missed – which is very difficult to do – and means that your home is likely going to be a much safer investment than it would be if you picked a random time of the year to lock in a mortgage rate.
To find out today’s current home mortgage rates, check online. Most banks publish their current mortgage rates, and some independent mortgage websites feature a chart that is updated every week according to the nation’s best home mortgage rates. Using a chart like this, you can easily compare mortgages across different institutions.