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Factors that Affect Mortgage Rates Economy

Economy is One Vital Issue Affecting Mortgage Rates

Worldwide happenings have an impact on the financial wealth of the world. Exchange rates, employment, precious metal market, prices of bond and stocks even mortgage rates, all are influenced by it. When a mortgage is being sought for, the borrower keeps a track of the current economy. People intend to fix the loan when rates drop. And when the rates rise they play safe.

A terror was prevalent for several days that Greece would prove to be a debt non-payer and the financial system of the Europe on the whole would come crashing down. Depositors or patrons did not want to keep their money in the continent anymore. Although did not have any idea of where to place it. Bonds of America were fully supported by the government. This is known to be the most secure for depositing. There were growing needs from the overseas for U.S. treasury. This made the interest rate come down and people wanting to purchase houses in U.S. as well as refinancing mortgages were immensely in advantage.

  • Capital Bonds in Trend
  • Mortgage rates are decreased by treasury bonds of U.S. because of their demand. Bond yields or the interest rates and bond prices go in two different ways. The interest rates go down when bonds are the current trend and their costs shoot up.

  • Hope for the Better
  • Price hike is a panic when the financial system is healthy. Few people then wish to purchase bonds. The cost of bond is reduced and the mortgage rate rises. If you possess a certain amount bond and you are not getting a buyer because of plunge in unemployment and stock prices sky high. Your selling price comes to low. The buyer receives the same rate in a year. But in certain situations such as this, the buyer's interest rate increases.

  • Mortgage Rates and Treasury Bonds
  • National reserves are closely followed by mortgage rates. This means that they pursue the similar course. Although the guarantees which are mortgage supported are risky. Instead bonds that are supported by the government are safer. Before buying mortgages the investors go for bigger rates to make up with the risk. There is rise and fall in MBS and treasuries but by a small percent.

  • Government Controls
  • It is quite often heard that the national reserve is increasing or dropping interest rates. Fed reigns supreme where rate of national funds are related. This means the rates that are charged by the banks to cover sudden loans for cash requirements. However these are different from the rates of long tenure mortgage loans. Mortgage rate might increase if the rates of national funds are lowered by Fed.

When the rates of national resource were lowered the financial system of the country went clinking with money. The extra money contends for inadequate supply such as oil. When more money fights for oil of same amount then cost rises up. There is now a possibility of rising costs. And when bonds become unpopular there prices drop and interest rises.

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