Relationship between Mortgage rate and house price ....?

Question

Also, who decide mortgage rate... govt... banks or realestate people....Can we say high mortgage rate means low price...of home...

Answer 1

There is an inverse relationship between home prices and mortgage rates but it is not as close as you might think. When rates are low investment is high (investment in all industries), when rates are low it costs less to borrow money. Opportunity cost is lower. Everyone wants to invest and the easiest way to get money from a bank to invest is to buy real estate. When there are more buyers than sellers the price goes up. There is a direct relationship between supply and price. As price goes up so does supply (new homes built). . This supply demand goes on until they reach what's called equilibrium, supply equals demand and a price level is reached.
When interest rates increase it costs more to borrow money so the demand decreases. Opportunity cost increases.
The Fed decides on the interest rates. They can manipulate the rate by controlling the money supply. Commercial banks have required reserves and excess reserves. These two added together equal legal reserves. Required reserves are what the fed says the banks must have at all times to honor customer transactions. Excess reserves are what the banks can lend to other people. When the fed sells bonds it is sold to bankers and private interests, this takes money out of the supply and there is less money to lend to borrowers, this increases the interest rate. When the fed buys bonds it puts money back into the money supply decreasing interest rates. The fed can also increase or decrease the required reserves to change the money supply.
To answer your question high mortgage rates do not necessarily mean low price of home, it means higher borrowing costs.

Answer 2

The price of the home is generally what it is appraised at. An appraiser sets the price based on what similar property in the area has sold for, along with the features of the home, it's location, and condition. As a general rules homes sell for at or a little below appraised value.

The mortgage rate is determined by the bank based on your credit score. There are three major credit reference agencies in the US, and each of them record information about you. They record how well you pay your bills, how promptly you pay, how much money you owe in loans and credit cards. They record bad debts or judgments against you.

The higher your credit score, the lower your interest rate. The lower your interest rate, the lower your payment, and the less money you will have to pay over the life of the loan.

Buying a home is a very difficult process if you don't know much about it. You need to meet a knowledgeable mortgage adviser first of all and get pre-qualified for a loan. Based on your income and financial status they will be able to tell you what kind of price range you should be looking for, along with other useful advice.

Answer 3

Your INTEREST rate will depend on your credit rating and the lender (bank or mortgage company). If you have a high credit rating (good credit) as reported by the three credit bureaus:

Equifax

http://www.equifax.com/home/

Experian

http://www.experian.com/

and Trans Union

http://www.transunion.com/

You will be able to get a lower interest rate than if your credit rating is low. This is also true for car purchases and credit cards.

Nowadays it has become common for employers to check your credit and decide on employment based on that. It is also a deciding factor in auto insurance, people with low credit rating pay more.

Another deciding factor is the current interest rate set by the Federal Reserve Bank, in other words no matter how good your credit, you are not going to get 3% when the going rate is 7 or 8%.

Answer 4

who cares?? Look around lately? How many foreclosures?? (Just kidding) According to wall street the prices of homes are on the slups and the it is a buyers market...... THe rates are set by the big belly's on Wallstreet. (The stocks and bonds and a big man called Greenspan.... I think .... Used to be in know of Business and the Stocks, but profession change... I think u can contact the Fannymay(spelling?) search on google and this org. my have the rates information... No. Rates add to the costs

best wishes...

Good time to by in the midwest... West is booming and the $$ homes through the roof

Answer 5

there is no direct relationship between the mortgage rate and the house price.