So many people want to predict where the mortgage rates are going. After all, even a single percentage point of movement in mortgage rates can and will affect other rates in the market, not to mention possibly lead another family on the brink of becoming homeless.
Unfortunately, predicting mortgage requires a crystal ball, a third eye and a magic wand, all of which no human being has yet to possess. Still, you can predict with a certain degree of accuracy where mortgage rates are headed. You just need to learn how to study trends, correlate two things and be observant of the economy.
Factors to Consider
It must be emphasized that mortgage companies have their own ways with which to set individual rates. However, they tend to stick to similar sets of factors when considering their rates, which you can also use to predict where said rates are headed.
First, you have to look at the rates on the Treasury notes good for 10 years. More often than not, mortgage rates follow the US Treasury rates precisely because any lower than the government’s rates and the lenders will operate at a loss. This is common sense, too, considering that the government is often well-versed in economics than the guy with an unpaid mortgage in his hands.
Second, you need to observe where the inflation rates are going. Keep in mind that there is a direct and almost proportional relationship between mortgage and interest rates. Again, it will all boil down to business since investors want a better rate of return no matter the state of the economy. Thus, when the inflation rate goes up, expect the mortgage rates to go in the same direction.
Third, you should also look at the trends. History does repeat itself in many instances but you must beware when drawing conclusions as many of today’s dynamics may have not been present in the past.
Keep in mind that mortgage predictions are just that – guesses. Thus, you should not be overly concerned if and when your guess falls off by a few percentage points since you neither have the crystal ball nor the third eye to accurately predict such things.
Tips to Know
You also need to observe what the other big name lenders are heading off into where their rates are concerned. Usually, the players in the industry will be heading in similar directions although their rates will differ by a few points. Thus, if a mortgage company announces that it will be cutting down rates, you can be sure that the rest of the pack will be following suit sooner than later.
And of course, look at history. Many of the factors that have influenced the movement of the mortgage rates are coming back in the new economy to influence said rates again. You may say that it is a cycle but that will not be accurate in all instances either. Just learn from the past and it can show you where the future could be.
In conclusion, you should not have a big problem predicting mortgage rates because these do not experience significant changes for any given period of time.