Have ever heard about mortgage rates in the media only to then call a mortgage company and receive conflicting information? Here is why the media’s reporting on rates should be taken with a grain of salt…
Know this-real time information is critical. When you hear about mortgage rates moving in the news, by the time it actually prompts you to take action it is already hindsight, i.e. dated. Mortgage rates and pricing change just the way the price of the stock does. Mortgage pricing which stimulates rate movement, may change multiple times per day or remained unchanged, based on economic events unfolding domestically and internationally.
Stocks, Bonds & Mortgage Rates
Interest rates move at the choice of an alternative investment foregone. Investors on a broader picture place their money in equities or fixed income arena. When investors are optimistic about the economy, they buy stocks, moving their monies from the bond market to facilitate transactions. This action causes mortgage pricing and rates to worsen (go up). When negative or less than expected financial reporting is made publicly known, investors typically, tend to shy anyway from stocks, causing a selloff, shifting their monies into the fixed income/bond market, driving yields up and mortgage rates down. Mortgage rates improve (drop) based upon bad economic data. Strange as that may sound, lenders want to see yields in mortgage-backed securities rising, which is a driver and support layer for low rates. For example last week, the massive stock market crash sent mortgage rates plummeting lower for about 48 hours and then immediately deteriorated as the stock market regained its losses, and rates went back up .25%. If you heard about the news of the stock market crash with lower rates and then inquired about mortgage financing in 72 hours of that market movement, you would’ve been receiving much different rate and price quotes than what you otherwise may have heard about in the news.
The Media Does Not Offer Financial Guidance
Media outlets have a profit motive, which does not include watching out for your best interests. Put simply, their function is generating revenue, not determining for you when the optimal time for locking in your mortgage rate and price is, that’s role your loan professional takes working in tandem with your expectations. When you see a media tagline “Mortgage rates improved .375% this week “, call your loan professional for real time quote. In doing so, ask them what transpired in the market, and what pricing changes (which affect rates) occurred and those changes if any affects your loan specifically.
This is the type of thing, the media does not report, how economy rate changes may impact you financially. Remember by the time you hear it in the news, the rate and pricing has already changed. For example “30 year rates drop to 3.75%,” do not automatically assume that you’ll be able to get a 3.75% loan as your credit score, loan amount, equity, occupancy, loan size, loan purpose, and mortgage company (lenders price loans differently) impact your rate and cost quote on any given day.
Furthermore, do not be fooled by a slick mortgage advertisement, all mortgage lenders get their money from the same place and no lender, broker or bank, has a monopoly on the market. Ask questions and make sure to communicate with your loan professional especially about any rate and pricing expectations you may have, as that has direct bearing on what you’re going to pay over the next 360 months.
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