Today I want to talk about mortgage rates. What makes them go up? What makes them go down?
First, I want to start with who owns mortgages. Fannie Mae, Freddie Mac, and Ginnie Mae fund virtually all of the traditional mortgage loans in the United States.
They sell securities to investors such as private investors, corporate investors, insurance funds, and even foreign governments to fund loans that we write. These places buy these securities because they are backed by the full faith and credit of the U.S. Department of the Treasury. What causes the rates to go up and down is the demand for those securities.
If investors are buying the securities, then the yields that they pay are going down. This would mean that your interest rates decrease.
Meanwhile, if the demand for those securities decreases, then they raise the yield to encourage them to buy more. This, then, would increase the interest rates.
Thinking about it in terms of the stock market, if your 401(k) is going well, then interest rates are probably going up. If your 401(k) is not doing well, interest rates are probably going down.
If you have any additional questions about this or anything else that is mortgage related, please feel free to give us a call. We would be happy to help you.