Personal Finance, Business and Finance Solution

The question I get asked the most in regards to Massachusetts Mortgage Rates, is what drives them. My clients are amazed that it is not the fed. When the Fed makes a move, they can change a rate called the “Fed Funds Rate” or “Discount Rate”. These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like. On the day the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed changes. This is due to the dynamics within the financial markets in response to inflation.

Massachusetts Mortgage rated are actually driven by Bonds, when the market is buying bonds they are helping drive the 30 year mortgage lower. It’s a double edge sword for many people; they want the stock market to due well, but they want interest rates to drop. However, most of the time when thee Dow is going up so are interest rates. And when it is going down interest rates improve.

So the next time you are looking for mortgage in Massachusetts make sure your mortgage person actually knows what drives rates, and how it all works. If they cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday’s newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to grab yesterday’s paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future?