Mortgage rates differ across lenders. If you really want to know more about current mortgage rates and whether you’re getting the right deal, merely looking at the various rates won’t help much. A lot of digging is needed. In other words, you should know how those numbers were arrived at. Most homeowners blindly trust or follow what the banks or mortgage brokers tell them, and aren’t keen on doing their own research. Even if you’re not looking for current mortgage rates, it still pays to learn mortgage rate movements.
A change in mortgage rate is usually by .125 percent or 18th of a percent. This may seem a negligible figure, but when you put into perspective or apply the change of rate to your dollars, it may mean several thousand dollars in costs or savings annually. And the number only becomes bigger if the entire loan term is considered.
As aforementioned, a mortgage rate goes up or down in 18th of a percent. For instance, if a mortgage rate of 5 percent moved up to 6 percent, it would have undergone corrections eight times before attaining the 6 percent mark. If a rate looks odd, such as 5.86 percent, it means the rate comprises APR or loan procurement costs. Similar is the case with promotional rates such as 4.99 percent or 6.99 percent.
Long story short, your mortgage rate would be a whole figure, such as 4 or 5 percent, or fractional, comprising some eighths.
Typically, interest rates spike when bond rates increase, and vice-versa. Do not confuse bond rates with bond prices, as the latter reacts inversely to interest rates.
Investors buy bonds when the economic conditions are bleak. When bond purchases go up, the associated yield goes down, and also the mortgage rates. However, when the economy is expected to blossom, investors buy stocks, which brings down the bond prices and pushes the mortgage rates or yield higher.
Mortgage rates are vulnerable to the economic situation, similar to treasuries and bonds. This is why job reports, gross domestic product (GDP), consumer price index (CPI), consumer confidence, home sales, etc. impact mortgage rates so much.
As a thumb rule, expect mortgage rates to go down when the economic scenario isn’t great. Good economic news, on the other hand, pushes up rates. If things do not look good, investors are bound to sell their stocks and find solace in bonds, which means lower interest rates and yields.