Today's Mortgage Rates: Will They Get Better?

While today's mortgage rates are fairly low, it's always nice to know if there are going to be even lower in the near future. However, knowing if interest rates for mortgages will be higher or lower in the future is very difficult to forecast. There are many factors that affect current market interest rates for home loan mortgages. For example, interest rates that banks and mortgage lenders offer are generally directly influenced by the Federal Funds Rate of the United States Federal Reserve Bank that the Federal Reserve Bank charges member banks.

Federal Reserve Federal Funds Rate
The Federal Funds Rate is the interest rate that the United States Federal Reserve Banks charges to member banks for overnight loans that are made to fulfill reserve funding requirements. In addition, this is also the rate that the Federal Reserve charges US banks to borrow money for a 24-hour period. The level at which the Federal Reserve Bank set the Federal Funds Rate always affects the amount of the level of interest rates that banks and home loan lenders charge to customers on home loan mortgages.

Prime Lending Rates
As it is used in the United States, the prime lending average is three percentage points, above the rate of the Federal Funds Rate. This is considered to be the absolute lowest interest rate that any bank or lender would consider offering to potential customers that have the highest credit ratings and scores. However, the prime lending rate is usually not offered for most fixed rate or variable rate home mortgage loans. Generally speaking, home mortgage loans are usually 2 to 3 percentage points higher than the prime lending rate.

Forecasting Future Mortgage Rates
While it is difficult to tell if home mortgage rates will decrease or increase in the future, you can usually tell a lot about the direction of rates by what the Federal Reserve Bank is charging banks to borrow money for overnight loans. Whenever the Federal Reserve rate is less than 1 percent, it is probably safe to assume that mortgage rates will not travel much further down. However if the current interest rate charged by the Federal Reserve is 2 percent or higher, then there is always room for rates to move down in the future.

Regardless of the interest rates that might be available in the future, you should always search for the lowest rates that are available to you. If you have good credit, you will probably be able to refinance your home. These days, refinancing a home is fairly quick and easy and can generally be completed in a few days. Therefore, always keep an eye out for lower rates and make adjustments to your mortgage, and interest rate, when necessary.
blog comments powered by Disqus