Mortgage Rate Predictions

Making accurate mortgage rate predictions is nearly impossible Mortgage rates are affected by many different factors such as fluctuation of the market and the current state of economy.

Trying to predict future mortgage rates, and mortgage rate fluctuations as well as speculating whether mortgage rates will stagnate, go up or go down cannot be accurately done. In fact, trying to predict mortgage rates is almost like predicting weather beforehand. It is not possible to predict mortgage rates precisely. While many financial gurus and analysts get paid big money to predict mortgage rates, the marginal errors in such predictions can be substantial.

Economic climate can give some signs of future mortgage rates, as well as the state of the markets and the economy in the country and worldwide.

There are several factors that influence mortgage rates fluctuations.

Inflation is one of the criteria that influence mortgage rates. Mortgage interest rates move in response to the markets, and supply and demand, and this is a separate factor aside from the inflation. There are nominal interest rates as well as “normal” interest rates, which differs.

Looking at the market moves one day and reading interest rates for that day does not guarantee that you will get this particular interest rate when you fill out your loan application at the bank

and lock the rate at which you will be given a refinance or purchase loan.

Reduced Availability of Credit is another factor influencing mortgage interest rates. If there is more supply than demand in the mortgage markets, interest rates will decline. If demand is exceeding supply of the available credit, interest rates will go up.

Another factor affecting mortgage rates is risk. Any financial decision takes a level of risk into consideration. When real estate is booming and the real property values are going up every single day, risk for the lender is low. Even if the borrower cannot make mortgage payments, the lender can foreclose on the loan and sell the property at a foreclosure. In this case, with the increased value of the home, the lender can recover its losses easily when there is a ready and willing buyer.

Naturally, when home values plummet, the default risk for the banks suddenly increases, which means that they will be charging higher mortgage interest rates.

Factors Which Make Mortgage Rates Predictions Fall: Government Intervention

The US Government is the major deciding factor in the financial markets that affects interest rates. The Government issues and sells Treasury bonds that have various interest rates. Additionally, the US government can influence the overall health of the market for money, affecting the fluctuation of the real interest rates, but not the nominal interest rates.

Additionally in the environment of upcoming elections the US Government tries to push the increase in mortgage interest rates back to November after the elections have passed.