Bond market and mortgage rates
Bond rates directly affect mortgage rates since they attract similar buyers.
Bond rates directly affect mortgage rates. This may seem a bit strange, but there are logical reasons for this effect. Most mortgage loans are sold into the secondary market. The secondary market then sells "pools" - groups - of mortgages or creates mortgage-backed securities into the investment market. Their competition is bonds - longer term investments with specified returns - interest rates. This causes bond rates and prices to directly affect mortgage rates.
Bonds, whether corporate or municipal - issued by local governments - tax free or not, are long-term investment choices favored by large institutional, insurance, pension plan or other government investors. They offer a stated interest rate of return and are less volatile than common stocks. The risk versus reward factor is lower, but these investments are historically much safer that common stocks.
Groups of mortgages can be "pooled" to create a larger investment product favored by institutional buyers - insurance companies, pension plans or local governments. Like bonds, mortgage pools are less volatile and much more secure than common stocks. Similar investors must concentrate on safety more than profit possibilities. Mortgage pools are safer than any common stock investments.
Similar to mortgage pools, mortgage-backed securities (MBS) compete directly with bonds in the investment market. The difference from mortgage pools: The investor owns the security, backed by mortgages, instead of the mortgages themselves. For example, a bond with a stipulated earnings rate of six percent will compete with a mortgage backed security of six and one-half percent. If the mortgages backing up the security are sound, the security is a better option.
Mortgage Rate Effects
Instead of being influenced by the prime rate or auto loans, mortgage rates are more heavily influenced by the bond market. When the bond market is strong, with many investors, the mortgage rate tends to decrease. Conversely, when the bond market is weak, mortgage interest rates tend to increase, to make pools or securities more attractive to investors. This influence renders other consumer interest rates -auto, personal, home equity - less important to affecting published mortgage rates.thinking for yourself quotes thinking from first principles thinking from a to z thinking from the end thinking from the middle thinking from different perspectives thinking from the underside of history thinking from others perspective thinking from first principles book thinking in between difference in thinking between males and females thinking in front of computer meme thinking in front of head thinking in java thinking in systems a primer thinking in bets annie duke thinking inside the box thinking inside the box meaning thinking inside the box chess thinking inside the box book thinking inside the box examples thinking inside the crease thinking inside your head thinking inside the box chess pdf thinking into results cost thinking into results book pdf thinking into existence thinking into results review thinking into results lessons thinking into results lesson 2 thinking into results audiobook thinking like a scientist answer key thinking made of thinking putty made of computational thinking made of thinking you are made of glass handmade thinking of you cards homemade thinking of you cards thinking emoji made of thinking emojis critical thinking is made of thinking near rhymes near thinking thinking cup near me thinking putty near me thinking tools near me thinking spots near me thinking to do near me thinking errors class near me next thinking of you flowers next thinking of you peace lily thinking of next year thinking of you gifts thinking of you today thinking off meaning thinking on the margin thinking on your feet thinking on my feet thinking on your feet synonym thinking on the margin definition thinking on the margin examples thinking on the fly abstract thinking as opposed to practice abstract thinking as opposed to practice crossword clue how to practice abstract thinking am i good at abstract thinking how to train abstract thinking thinking opposite of opposite thinking board of innovation