Helpful Articles



Helping You to Understand Interest Rate Trends

“I saw on a billboard yesterday that interest rates are at an all-time low…”  “I was online over the weekend, and saw that rates are looking really low…” “I got a call from a mortgage company last night, and they offered me a better deal…”  All these different advertising gimmicks can really be too much for a consumer

Whether you want to admit it or not, you have probably gotten at least a few of these calls. Worse yet, you probably shop all over town for the best deal, when this might not in fact be the case.  I believe that the truly best interest rate is the best personal financial strategy for you, as accurate as possible, and the one that can be closed in a timely manner. This is a deal that I know I can deliver.  The cost of money is the same all over and it is adjusted to your financial situation and your FICO.  If a deal seems too good to be true, it probably will be.  If the interest rate is too low, there are probably going to be other fees associated with the interest rate, for example, more severe payment penalties, etc.  Sometimes it’s worth it to pay a little more in order to ensure that you will get the best interest rate, including one that will make payments the easiest on you.  You have to compare oranges with oranges in order to know what kind of loan you are getting

I know the mortgage market is frustrating. As a mortgage broker, I want to help you be smart with your money. My goal is to help you, the consumer, by being your trusted advisor in the home loan process. I want you to feel comfortable knowing that you are working with an experienced, consultant who is in the business of giving advice, not selling rates. I believe that the largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly or troubleshooting issues that might arise along the way.

UNDERSTAND THAT INTEREST RATES CAN CHANGE DAILY, EVEN HOURLY.  This means that if you are comparing lender rates and fees – this is a moving target on an hourly basis.  For example, if you have two lenders that you just can’t decide between and want a quote from each – you must get this quote at the exact same time on the exact same day with the exact same terms or it will not be an accurate comparison.  You also must know the length of the lock you are looking for, since longer rate locks typically have slightly higher rates.

There are some questions that people usually have to ask a mortgage broker when they are new to the market.  If a mortgage broker doesn’t know how to answer these questions, he probably won’t be able understand your loan either 

1) What are mortgage interest rates based on?

Mortgage interest rates are based on Mortgage Bonds.  A common misconception is that the interest rates are based on the 10-year Treasury Note.  However, while the 10-year T-Note sometimes “trends” in the same direction as Mortgage Bonds, it is also not unusual to see them move in opposite directions.  

2) When the Fed “change rates,” what does this mean, and what impact does this have on mortgage interest rates?

The answer may surprise you. The Fed can only control two rates, the “Fed Funds Rate” and the “Discount Rate.” Both are very short-term rates that impact credit cards, credit lines, auto loans and the like. Mortgage rates sometimes will actually move in the opposite direction as the Fed change. In the example of a Fed rate hike, raising the “Fed Funds Rate” helps to combat inflation, which is a Bond’s worst enemy, as inflation erodes the future fixed value of that Bond. So a Fed rate hike can be good for Bonds.  The reason for this is that in anticipation of interest rate hikes, mortgage companies adjust the mortgage rates on loans before they increase.  Sometimes the increase may not as big as they anticipate, making their previous adjustments too big, so they will lower the interest and make any other adjustments where necessary. 

3) What's happening in the market today, and what do you see in the near future?

If a broker cannot answer how Mortgage Bonds and interest rates are moving “live” – in real time – or explain what is coming up in the near future that could impact rates, you are talking with someone who is still reading last week’s newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who was only able to reference yesterday’s paper to tell you how a stock traded, but has no idea what the movement looks like at the present time or which market conditions could cause changes in the near future? No way. Be smart. Ask questions. Get answers. More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life…but I do this every single day. It’s your home and your future. It’s my profession and my passion. I’m ready to work for your best interest. 

As a good mortgage broker, I believe that it is vital to have the answers to these questions and many more. In today’s competitive climate, you can’t afford not to be equipped with cutting edge knowledge, information, and training.  

While other brokers might try to desperately barrage you with technical jargon and low rates, it is always important to remember that value, suitability, and performance are what matter, not just what’s written on the bottom line. 

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