How Lenders Set Mortgage Rates

How Lender's Set Mortgage Rates
Ever wonder how lender's come up with the​ rates they do? you​ can stop wondering,​ cause I'm going to​ tell you​ how .​
We all answer to​ a​ higher mortgage rate power,​ namely the​ secondary market .​
The secondary market is​ where Fannie Mae,​ Freddie Mac,​ and other mortgage lenders ply their trade .​
These government founded agencies purchase the​ loans that lenders make,​ then either hold them in​ their portfolios,​ or​ bundle them with other loans into mortgage-backed securities .​
Those securities are then sold to​ mutual funds,​ Wall Street firms,​ and other financial investors who trade them the​ same way they trade other securities and bonds.
As a​ result investors,​ rather than mortgage brokers and bankers,​ are in​ control of​ the​ rates .​
When economic news suggests the​ economy is​ heating up,​ investors demand higher yields from the​ lenders .​
This happens because they don't want to​ buy low yield bonds now,​ in​ case the​ Fed raises rates to​ cool the​ economy,​ which would mean they will make higher yield bonds later .​
The only way that lenders can get their loans sold in​ this situation is​ to​ raise the​ yields they offer investors .​
In turn,​ this drives the​ rates higher for consumers.
The same thing happens in​ reverse when it​ looks like the​ economy is​ cooling .​
Investors start clamoring for bonds,​ because they figure the​ Fed will have to​ cut interest rates in​ the​ future in​ order to​ get the​ economy going moving along again .​
If the​ investors wait,​ they'll end up with lower yielding bonds .​
Since investor demands are so strong,​ lenders who control loan supply can offer lower yields .​
The result is​ a​ lower rate for consumers.
To get the​ best rates out there,​ consumers really need to​ pay attention to​ financial news .​
Consulting with a​ mortgage lender or​ broker can also be very helpful .​
In most cases,​ the​ mortgage broker will be very knowledgeable and up to​ date on​ the​ economy.
How Lenders Set Mortgage Rates How Lenders Set Mortgage Rates Reviewed by Henda Yesti on July 01, 2018 Rating: 5

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