Mortgage Rate News

For the second week in a row, mortgage interest rates are dropping. This is good news for would-be homebuyers who have had to contend with higher interest rates, even as the mortgage market stagnates. This could also be good news for mortgage lenders, who have been giving out fewer loans. Lower mortgage interest rates could lead to an increase in loans given out.

Lower interest rates save you money when financing your mortgage

Interest is the money you pay for the privilege of borrowing. When financing your mortgage for a home purchase, you interest charge is simply money that goes straight to the bank. You do not see any benefit from that portion of your mortgage payment.

The higher your interest rate is, the more money goes to the mortgage lender. This means that you pay more money when mortgage interest rates are higher. For a home that costs around $200,000, spread out over a period of 30 years, a 1% difference in mortgage interest rates can mean a difference of tens of thousands of dollars that you pay extra to the mortgage lender.

Lower mortgage interest rates dropping can make things more affordable for homebuyers. And that is important right now. It can make it easier for buyers to get home mortgage loans on foreclosures (which are becoming sought after by buyers and investors alike) right now.

How long will mortgage interest rates stay low?

Even though mortgage interest rates are dropping right now, things could change next week. Mortgage rates have been volatile, and Realtor.org reports that there could be reversal of the current trend:

Amid the nervousness, mortgage rates touched lows not seen since the first week of June. But inflation remains an issue, as evidenced by the Consumer Price Index for June, and will continue to spar with weak economic growth as the factors influence the direction of mortgage rates. The up and down yo-yo of mortgage rates seems likely to continue, with rates fluctuating within a range.

Tags: mortgage interest rates, mortgage rates drop, home mortgage loans, mortgage lenders,
homebuyers

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.

Tags: home loan, mortgage interest rates, home mortgage loan, mortgage loan blog,
compare mortgage rates, local mortgage rates, national mortgage rates

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.

Tags: mortgage interest rates, home equity, home mortgage loan, mortgage loan blog,
HELOC, ARM, Fed rate cut