Mortgage Interest Rates – Everything You Need To Know. What Makes Them Change?

What’s up everybody my name is Joseph
Jessie, I’m here with Tim Lucas. Hi everybody. We’re here with The Mortgage
Reports talking about mortgage rates. Now someone like me, let’s say I’m in a
position to purchase my first home – I’m probably going to do the process
backwards. I’m gonna go from finding the dream home that I want, finding an agent
in that area who can help me, get the home that I want and then – oh I gotta
figure out what I’m gonna do with the money.
So when you start looking at mortgages and mortgage rates they go up and down
like every day. Mm-hmm. You know I mean a lot of people probably feel like it’s like
trying to hit like a moving target or like catch a chicken or something it’s
like I’ve been down you don’t necessarily know when to jump in and try
to lock in a rate. Can you talked a little bit about like what causes these numbers
to go up and down so often? Yeah, you know mortgage rates are just like any other
financial market so I think the maybe the market that we’re most familiar with
is the stock market. (okay) Let’s say the Dow Jones or whatever you
hear on news headline no the Dow Jones said 24,000 today. It was at 23,800 you
know yesterday what happened? You know I guess that’s a good way to think
out about it because the stock market doesn’t just stay steady for a week or a
month at a time it’s changing not only daily but every minute of the day. And so
that’s kind of like mortgage rates because mortgage rates aren’t set by the
Fed or any other government organization they’re actually set by traders – almost like day traders. Like investors out there that are buying and
selling securities, and so they’re always analyzing hey our mortgage-backed
securities a good deal today. Do we think they’re gonna be a good deal six months
from now, a year from now and we can talk a little bit more about what
mortgage-backed securities are. But those are the drivers of mortgage rates not
necessarily like bond prices or anything like that.
So if it’s kind of like day traders are in control of the rates I’m sure things
going on kind of in like everyday news could probably affect their I guess
prediction of what rates could be right? Like what could happen in the
news that could affect rates? I think the biggest you know think that we’re all
really familiar with is a presidential election of the year 2016 is just like
the perfect example. Yeah I heard that was kinda big thing Yeah kind of a big deal.
Super unexpected and so anytime there’s any kind of big unexpected news you can
you can guess that mortgage rates are going to change pretty dramatically. So
what happened at that point was Trump got elected, I’m it was kind of
unexpected nobody really saw it coming. True.
So at first you know I remember
like late that night after that it was kind of like a sure thing that Trump was
gonna get in the stock market like really tanked. And what we thought was
gonna happen was that rates were gonna improve because whenever this kind of
the economy looks like it’s gonna go downhill that’s when the mortgage rates
improve. (okay) Kind of weird and what would happened instead is that traders
they decided that Trump would be good for the economy and so the stock
market like started to skyrocket. Skyrocketing right after that and what
happened also was that mortgage rates went up. Because whenever the economy is
doing well or there’s inflationary pressures on the economy which we can
talk about more as well, that means that mortgage rates are probably on their way
People are scared thinking rates are gonna go down rates; don’t go down.
Economy’s doing good thinking rates are gonna go down, rates actually go up.
Why is that? You would think that it would be the opposite right? Like economy
sucks, rates go down right along with it? Yeah. So, there’s a couple different ways
that like a good economy changes mortgage rates and makes them go
higher. So first of all it’s because of other investments that pay more. So
mortgage-backed securities which are the kind of financial instruments that drive
mortgage rates are actually viewed as like a safe investment. So let’s say you
just want to stockpile your money – it’s basically like mattress money right? (okay)
If the economy is doing bad you don’t want to go throw all your money into the
stock market because the stock market could lose 75 percent tomorrow right?
And all your money that you’ve worked so hard for is gone right? So if
you’re just like say you know regular Joe Blow on the street you’re gonna
stick that money under the mattress before you stick it in the stock market
right? So investors are the same way if they don’t want to lose a ton of money
because the economy is doing bad they’re not going to put their money into stocks
they’re gonna put it into bonds. And a type of bond is a mortgage-backed security
and what that is is just like a bond that kind of groups a bunch of mortgages
together. It’s pretty safe and it kind of pays a certain amount of interest every
every month or a year and it’s a way that investors are pretty assured that
they’re not going to lose money if they invest in those. And so how that kind of
affects rates is the the demand for those mortgage-backed securities makes
rates go up or down.
So pretty much when you’re shopping for a home you’re always
at risk for the rates jumping up and down right? There’s no kind of like this is the right hour of a Tuesday on the third
week of December to purchase a home?
Right. It’s pretty tough we do actually on The
Mortgage Reports we do have an article about you know what’s the best day to
lock in a rate? And that’s just like looking at averages over the time – over a
certain time but really anything can happen on any given day that could
change rates. You know right now or they’re talking a lot about tax reform
and in Congress and so anything like that where there’s a major implication
for the US economy could change rates. And there’s really like no way
to protect yourself against that until you lock in your rate. So what you
could do is you need to find a home first because lenders aren’t gonna of
course aren’t gonna lock in the rate without a property address. But once you
have the property you can lock in the rate and that’s gonna keep your a stable
until you closed on your home as long as you lock in for the right amount of time.
Let’s talk a little bit more about locking in a rate. Is that kind of the best way
for homebuyers to protect themselves from rising rates? Yeah, unfortunately you
can’t do like I said before you have a property. So like you could be shopping
for a home you like I’m kind of in the hunt, in the market for like a $250,000
home or whatever whatever the case is. Now if rates go up a lot for some reason
then you might be priced out of that home just because monthly payments gonna go up above what you know what you can afford or qualify for. But let’s say
you do find a home you don’t want to really play the market and say oh I
think rates are gonna go down, you want to you want to lock in as soon as you
have that home and you know your closing date. Which comes like after you
have the fully you know signed around purchase and sale agreement and both
buyer and seller agreed the purchase closing date. So it sounds
like it’s just a game of double-dutch. You have to figure out the right time to
jump in and start playing the game people. My name is Joseph Jessie, Tim Lucas,
this is The Mortgage Reports giving you a breakdown of mortgage rates and what’s
really going on with that and how it all works. Tune in next time for our next
video. We don’t know which video we’re gonna do but it’s gonna be something
about mortgages, it’s going to be something about how you can position
yourself to purchase a home, and it’s gonna be done in a way that’s
informative and not super duper dry. Our job here at The Mortgage Reports is to
present information to you like this in a way that’s easy to absorb and
hopefully a way that you can present it out to other people. You know a lot of
Millennials are in a position to purchase their first home and we want to
present the information to you that’s gonna help you get more home for what it
actually is that you qualify for. So tune into The Mortgage Reports, check out our
YouTube channel, we’re on Instagram Facebook, Twitter, and we’re also online tons of great information we’re posting daily. So again Joseph Jessie, Tim Lucas. This is The Mortgage Reports. We’re out. Later guys.

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