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LESSON 10: HOW LENDERS SET
MORTGAGE RATES
(continued from previous page)
The same thing happens in reverse when it looks
like the economy is degenerating. Investors start clamoring for
bonds because they figure the Fed will have to cut rates in the
future (to get the economy going again) and if they wait, they'll
end up with lower-yielding bonds. Since investor demand is so strong,
the lenders who control loan supply can offer lower yields. This
results in lower rates for consumers.
Because of this process, borrowers who truly
want to get the best rates have to pay more attention to financial
news than ever before. See Tips
What goes up, must come down. Interest
rates tend to move in cycles. After a prolonged increase,
a slow drop usually occurs. Savvy shoppers should keep track
of longer-term trends and wait to buy until rates decline. |
"To know
when to lock in on a mortgage, study economic cues. When
10-year and 30-year Treasury bonds go up -- rates go down.
When bonds go down -- the rates go up."
Jody Hodges, president, Hodges and Fooshee Mortgage,
Brentwood, Tenn.
"Look for competitive
interest rates. Watch rates for several weeks to see which
lender is consistently competitive rather then in and out
of the market."
Liz Logothetis, Gilpin Mortgage, Wilmington, Del.
"While the Federal
Reserve Board influences mortgage rates, remember that there
is not a direct correlation between the two."
Chet Neiss, BestPriceMortgage.com, Lancaster, Pa.
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