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Why Do Mortgage Interest Rates Go Up & Down?

ANSWER:  Many years ago, savings and loan institutions made the majority of home mortgage loans. They would often set a rate for new home loans for long periods of time - up to a month or so. As the lending industry has evolved, the buying and selling of mortgages has become very sophisticated and there are many different investors making new home mortgage loans. The easiest indicator you can follow in watching the direction of interest rates is the bond market.

Although interest rates usually have long periods of decline or increase, there are many days when rates may jump up or down dramatically -just as the bond market can. I call these "hiccups." When rates begin to go higher for a long term, it will be (as history has proven) a slow, steady increase. It is the trend you will want to follow. Is the overall trend up or down? Don't let those daily "hiccups" alarm you.