what determines mortgage interest rates that banks charge? bankrate.com says 5.8% today, yet banks are 6.5%?

Question

i am comparing a 30 yr fixed on bankrate to a the same in a bank. also, anyone know if there is a u.s. stock ticker symbol for the 30 yr rates?

Answer 1

Depends on the type of mortgage.

Some are fixed rate - and will not alter whatever the bank rate does. some are LIBOR ones which track London bank rates. Some are capped - which means they vary - to a maximum but not higher.

Depends on the type.

Answer 2

Some of the reasons you will see a rate advertised but not be able to find it easily is:

Usually advertised with a 2 point buydown. When you talk to the loan officer and express not wanting to pay points then that rate is gone,

May times they are advertising a 15 year note. When you go to a site and then see the 30 year note then obviously the rates do not line up,

Many lenders will advertise a rate which only a VERY small percentage of people will qualify for. They may be basing that rate on a 2 point buy down, purchase or rate and term only (no cash out refinance), 780 middle credit score, 65% or less loan to value, full income documentation etc...

Many of the notes are based on the 10 year T-bill, the LIBOR, the MTA etc... Basically if your looking for a traditional 15/20/25/30 year fixed rate keep an eye on the yield of the 10 year note. If the yield is going up then rates will most likely increase, if dropping then they are most likely dropping. This does not apply to the products based on different indexes.

If you are looking for something specific drop me a line and I may be able to assist you.

Kevin 866-562-6838 x 106
[e-mail]

Answer 3

The rate at which the bank will finance a loan is based on several things:

1/ First, banks typically borrow money to LOAN YOU MONEY. The cost of borrowing for banks is set by the Federal Reserve in the U.S, through Treasuiry Bills and other instruments. Some banks are able to give even lower rates whent hey use "other people's money" i.e. from customers deposits and other types of deposit accounts.

2/ Second, the credit history of the borrower also determines the risk level associated with that borrower. Borrowers with poor credit history will typically have a HIGHER rate while those with excellent credit are considered to be lower-risk and therefore rewarded with a LOWER rate.

3/ The index used by the bank also determines their rates. Some banks use Prime rate which is tied to T-Bills while some use LIBOR and so forth. There are different kinds of indexes. Prime rate is tied to the the govt's ability to auction treasury bills in the market while LIBOR is based on the deposist traded btw banks in London and therefore takes into accoutn infalationary factors while Prime rate is slower to react to infationary factors since they are traded at determined times...3 months, 6-months and so forth...

4/ Profit model used by the bank also determines their rates. Banks make money from the SPREAD i.e. the cost of them borrowing money and the utlitmate price they sell the loan...that in between is where their money so some banks with high volume transactions may have lower margins while a smaller bank, for example, may have a larger margin since it does ferwer transactions .......

I have tried to sum up a very complex process

Answer 4

Banks price their loans to be profitable based upon their delivery contracts with the major investors. This is called "hedging" and it is very much "playing the market". Mortgage rates are driven by the bond market. Consumer rates, on the other hand, like car loans and credit cards are driven by the prime rate of interest.

Answer 5

In England it is to do with the Bank of England base rate, the other accounts the bank is offering i.e. savings accounts, and competitiveness vs profits.

Answer 6

The rates change daily, and depend on your location, your collateral, and your credit rating. It's a huge auction market; shop around. I have dealt with www.mlcc.com, a real estate finance division of Merrill Lynch.

Answer 7

i belive the market says one thing and the banks put the intrest up abit to make a profit , those poor poor banks