Ever say to yourself, "how are mortgage rates determined?" It's not just Freddie Mac, Fannie Mae and other big lenders who control mortgage rates. Would you be surprised to hear that you and I and every person else who is looking for a mortgage or looking to spend money has a say in how mortgage rates are determined?
Usually the lender with whom you originally acquired your loan will sell it. Government-type agencies like Freddie Mac, Ginnie Mae and Fannie Mae will bundle your loan and others and generate what is known as a mortgage backed security. The rate of return on these securities are based on the promise of mortgage payments and interest paid by borrowers. These securities are offered just like any other investment.
Mortgage
When we're looking for a sound speculation and buy these mortgage backed securities straight through mutual funds or other types of investments, we expect a certain interest rate. In order to sell the securities, the securities must pay a rate of interest that is competing with other sound investments like Treasury bonds. So if the yield on Treasury bonds go up, so must the yield on mortgage backed securities and therefore so do mortgage interest rates to deal with those increases. Rates for 30 year mortgages regularly supervene right along with Treasury bonds. But since we keep mortgages about 10 years only, the 30 year mortgage rates supervene just a itsybitsy higher than 10 year Treasury bonds.
Inflation is also a determinate for how mortgage rates are determined. If investors think inflation is on the rise, interest rates will rise as well.
How Are Mortgage Rates considered - You'll Be Surprised Who Controls the Rates