Mortgage Rate News

Right now, with liquidity for mortgage lenders a problem, and with the economy promoting inflation, mortgage interest rates on their way up. This means that those wishing to buy a first home — and especially those looking for a second home mortgage — things are getting a little expensive.

Rising mortgage interest rates mean you pay more money

Whether it’s a new home mortgage loan or a second home mortgage, the higher the interest rate, the more you will pay over the life of the loan. (Even on a $200,000 home mortgage loan, the difference between last week’s mortgage rate and this week’s is more than $10,000 total in interest.) This is an issue especially for those looking into mortgage loan refinancing. Many are finding that when they go to refinance from an ARM or an interest only loan, the newer, higher rate is still somewhat difficult to pay.

However, if those looking for second home mortgage loans do not lock in interest rates now, there is a good chance that, come August, they could see an additional rise in interest rates. The longer they wait, the greater the chance that interest rates will get even higher on mortgage loan refinancing.

Difficulties with mortgage loan refinancing

Increased costs due to mortgage interest rates are not the only problem plaguing those looking for second home mortgage loans. Getting mortgage loan refinancing is increasingly difficult because home values in many areas are falling. These home values mean that many homeowners are already upside down on their home loans. SO, mortgage lenders are not willing to provide mortgage loan refinancing. And that does make sense. Why would you risk it?

So, the current situation offers an interesting bind. Mortgage loan refinancing is needed in order to forestall foreclosures, but some people are in a position that precludes them from getting that financing. And, even worse, some are in positions where they can’t even afford payments on new home loans — even if they could get them.

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Starting today, Banks.com is offering mortgage interest rates and quotes from around the country. It is possible to compare mortgage interest rates in your state, and from different lenders. This is a great tool that can help you better shop for the best home mortgage loan for you.

Why mortgage interest rates matter

Interest is money you pay for the privilege of borrowing money. You pay a fee to the lender in order to borrow the money. Your interest rate is expressed as a yearly percentage of the principal. The higher your interest rate, the more you pay in interest charges. To illustrate with a simple example:

You borrow $10,000 for a year at a rate of 7%. Your total repayment is $10,000 + (0.07 x 10,000 = $700) = $10,700. If you have an interest rate of 9.5% on that same loan, your repayment total is higher: $10,000 + (0.095 x 10,000 =$950) = $10,950. The difference in one year, for a 2.5 point difference, is $250.

You can imagine what a difference mortgage interest rates make, since they are spread out over 30 years. In the simplest terms, that’s like a savings of $7,500 for our example (if you paid interest on $10,000 each year for 30 years). With a house, mortgage interest rates can mean savings of tens of thousands of dollars over the life of the home loan.

Comparing mortgage interest rates

The rates listed at rates.banks.com are the best rates — what you could get with the best credit. But they do provide a useful ballpark comparison for mortgage lenders in your area. It gives you something to go on. When you actually talk to a home loan representative, make sure that you let him or her know your most current credit scores, and how much income you have. This will help in terms of narrowing down what sort of mortgage interest rates you can get.

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Mortgage interest rates saw a drop this week. Things have been crazy on the mortgage market lately. Rates have been a bit volatile, and lately they have been trending up as inflation increases. And, even though the Fed rate cut earlier this week didn’t directly affect mortgage rates, there is an indirect connection. Tom Vanderwell on Straight Talk About Mortgages makes this connection between the Fed rate cut and mortgage rates:

Why would that cause mortgage rates to drop? Inflation and the value of the dollar. The value of the dollar has dropped dramatically since the Fed started lowering rates and it is anticipated that it will rise “somewhat” now that we’re in “pause” mode. So what? If the value of the dollar goes up, the cost of oil comes down. If the cost of oil comes down, inflation drops. And, if inflation drops, what happens to mortgage rates? They tend to drop as well.

Indeed, mortgage interest rates are more closely tied to 10-year Treasury rates, since both are long-term and the Fed funds rate is a short-term indicator. For buyers, the drop in mortgage interest rates is attractive, since it means that they will pay less in interest over the life of the loan.

Additionally, for home equity loan borrowers — those with variable rates — the Fed rate cut is more directly influential. Those with variable rate ARMs and HELOCs (and those with credit cards), should see a decrease in the interest rate charges they are getting.

It remains to be seen whether or not the current drop in mortgage interest rates sticks around. Many factors influencing the economy, including when home prices hit bottom and can start recovering, will influence where mortgage interest rates go from here.

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HELOC, ARM, Fed rate cut