The Rise and Fall of Mortgage Interest Rates:
How They Affect Financing Options
My phone is ringing off the hook these days ...
The latest move by the Federal Reserve has garnered lots of attention and piqued the interest of many. Many of my callers are wondering:
- Have mortgage interest rates fallen?
- If so, how much have they fallen?
- How might this affect my current mortgage?
- How does this affect the financing options I have?
Answering those questions is not as easy as it might seem, as each caller (and consumer) possesses their own individual financial standing and credit history. As a result, their financing options and opportunities are personal only to them and unlike anyone else's.
That, of course, means I must ask questions and gain information before I can give solid reliable answers and mortgage advice. A fact-finding dialogue between caller and lender is needed to successfully accomplish that.
Again, the answers I provide each caller will be based on the individual caller/consumer's personal finances, personal credit, personal credit history, and more. The answers will be very specific to them.
But while it's important to remember the uniqueness and individuality needed in this process, it's also important to point out that there are some unchanging universal truths to be found as they pertain to the Federal Reserve and interest rates.
The first is that the Federal Reserve rate does affect us all. But it affects us in a variety of ways. It's also true that how much it affects you is dependant on your financial "lifestyle" and financial choices.
So what are some of the ways the Federal Reserve rate increases/reductions can most commonly impact consumers?
Those are:
- Credit Cards: The majority of credit cards held by consumers feature variable interest rates. Those rates are tied to what they call the "prime rate". The prime rate is determined by the Fed Rate. The Fed Rate is the overnight rate used by banks when they lend to one another.
- Auto Loans: If in the market for a car, you might see a slight rise or fall in the interest rate charged on an auto loan (dependant on a Fed rate increase or decrease).
- HELOC: The link between Federal Reserve Rate increases and decreases and loans is felt more directly should you have a Home Equity Line of Credit, a/k/a HELOC. If the increase/decrease is minor, such as with our most recent change (1/4%), it's likely that you will see a similar 1/4% change in your HELOC rate.
- Savings Accounts/CD Rates: Lower Federal Reserve rates can mean that your savings accounts/money market accounts/CDs reap a lower rate of return.
- Mortgage Rates: Like many relationships, the relationship between the Federal Reserve and mortgage interest rates can be somewhat complex. And hard to predict.
Why are they hard to predict?
- Mortgage interest rates are actually more reliant on the 10-Year Treasury Yield and the trading of mortgage-backed securities.
- The effect or outcome felt by Federal Reserve increases/decreases are not written in stone and can be quite unpredictable. The results reaped one time may not be the same reaped during another similar scenario.
- Results may buck historic trends and reap just the opposite of what would have typically been predicted. (We've seen that happen more frequently as of late.) In other words, other factors can weigh more heavily on the direction of mortgage interest rates than Federal Reserve Board rate cuts or increases.
- The state of the economy and world events also contribute greatly to the unpredictable nature of mortgage interest rates. Because of that, interest rates can change quickly.
Each of these things contributes to the complexity and challenges faced by mortgage lenders trying to quote/predict interest rates (and their future movement) for their clients.
Consider this: Have you ever driven by a gas station in the morning and noted the price only to return later during the afternoon and find that the price has changed? Mortgage interest rates can do much the same.
An interest rate that was available to a consumer in the morning may be unattainable later in the day. Things can change that fast. Consumers and lenders alike need to remain vigilant these days. (Note: During times of market volatility, the importance of locking-in a mortgage interest rate with your lender in a timely manner only grows).
For consumers that are already mortgage-holding homeowners, currently in the home buying/refinancing process, or considering the purchase/refinance of a home or investment property ... bells and whistles can sound upon hearing of a Federal Reserve rate hike or decrease. And they have been, as they're contributing greatly to the number of phone calls I've been receiving.
As a Chicagoland Mortgage Originator, I welcome the opportunity to discuss Refinance options. As I recommend to all my clients and referral partners, I feel it's best to discuss options one-on-one with the buyer, as no two deals are ever alike.
So for those seeking answers to these questions ...
- Have mortgage interest rates fallen?
- If so, how much have they fallen?
- How might this affect my current mortgage?
- How does this affect the financing options I have?
There is no magic formula or answers to your personal financing questions that can be easily shared here in writing. Mortgage financing has become that personal and individualized.
No, the information you need to accomplish your goal can be found through only one method. Our working together.
The answers we arrive at will then be based on YOUR needs, YOUR credit, YOUR finances, YOUR desires. Then and only then will you have the knowledge and information you need to move forward.
Contact me today. I'll put my 40+ years of mortgage experience hard to work on your behalf.
I'm easily found at:
Gene Mundt
Mortgage Lender - NMLS #216987 - IL Lic. #0006220 - WI Licensed
American Portfolio Mortgage Corp.
NMLS #175656
Direct: 815.524.2280
Cell/Text: 708.921.6331
eFax: 815.524.2281
Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago
and the greater Chicagoland region, including:
The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL. etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL & WI.
Your Referrals are Welcomed & Greatly Appreciated!
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