Current Home Lending Info Blog for Southern Nevada

After a very scary week of some turbulence in the mortgage industry, interest rates are finally improving!  With over .5% hike in interest rates over the last week, mostly due to stock improvemets, there has been some very positive movement in interest rates today.  Even as recent as yesterday, stocks were having a good day.

For those that don't know, or those that I have not used this example for, let me explain it to you so you understand why stocks play such an important role when it comes to mortgage interest rates.  Unlike what you may hear from the bobble-heads on TV, interest rates are not tied to the 10 Yr. Treasury Rate.  In fact, in many cases, they actually work inversely.  Now, let's say that you are an investor on Wall Street and you have one dollar to invest.  If stocks are seeing a rise in the market, and you feel that stocks will continue to see a rise, you will put your dollar in a stock. 

However, when stocks begin to take a dive, and you see the NYSE and the NASDAQ getting hit by stocks plummeting, you want to make sure that your dollar stays safe, so you take that dollar out of the stock, and you put it into the bond market, which is where you really see what makes the interest rates move on mortgages.  Bonds carry much less of a risk than Stocks do, so if you feel that the stock market is volatile and unstable, you will put your dollar in the bond market which will help our mortgage interest rates stay low.

Now, the bond and stock market are not the only factors that effect the interest rates.  There are many factors, but one of the other major factors are the economic reports that come out during the month. 

The way these reports work is that they are each based on a specific category that effects our overall tracking of how our economy is currently doing.  With each report, there are "specialists" in these fields that predict what the report is going to be.  For instance, the jobs report is one of the major factors that comes out each month that weighs heavily on the movement of rates.  Now, with the job rates, just like all others, they rely heavily on what the market believes will happen, and the rates will adjust accordingly.  To remember it best, the way you want to look at the market is like this:  If it is something that betters our economy in the United States, that is bad for interest rates.  So, in the example of the Jobs Report, if we are anticipating that 100,000 jobs will be lost, and only 40,000 jobs are lost for the month, expect to see a major hit in the interest rates.   However, if they are expecting that 40,000 jobs will be lost, and 100,000 jobs are lost then the interest rates on long term notes, like mortgages, will likely have a very high drop in the rates.

There are about five or six major reports that effect rates like this.  So, when asking me or any other mortgage broker or banker what "The current interest rate is" remember that that question is a very difficult one to answer without having all of the knowledge of your financial situation, what you are looking to finance, and where rates are at the moment.  Interest rates have the ability to change as often as every second of the day, and there has definitely been days where you have seen rates move up and down many, many times. 

Make sure while shopping for a rate that you ask your mortgage broker what the bond market is currently looking like, and what economic reports are coming out, if any, that could have an effect on your interest rates.

I hope that you found this blog helpful, please feel free to leave comments, and have a great day!

David Schwartz