If you are looking for a home or about to sell one, you know that monthly mortgage interest rates are a key factor in housing affordability. But what makes rates go up or down? What national economic indicators affect the interest you will pay?
The information out there can be confusing. Should you pay attention to stocks, T-bills, bank rates, short-term rates, crystal balls or the Federal Reserve? Unless you are a financial professional, all the data can make your head spin.
Here is the one interest rate indicator that will tell you where mortgage rates are headed: Bonds. Bonds, bonds, bonds. Specifically, bonds called mortgage backed securities, or MBS.
It gets even simpler, but first here’s the Wikipedia MBS definition:
“A mortgage-backed security (MBS) is a type of asset-backed security that is secured by a mortgagor collection of mortgages. Mortgages are sold to a group of individuals (a government agency or investment bank) that securitizes, or packages, the loans together into a security that investors can buy.”
Don’t worry; this definition won’t be on the test.
Still sounds too wonky? Wait! Here comes the even simpler part. The bond impact simply works like this — bond market up, interest rates down. Bond market down, interest rates up. How is that for easy?
Where can you find the latest info? There’s lots of information just about anywhere on the internet (Google “Bonds”) or talk with your financial professional.