The 1 Force That Can Really Change A Mortgage Rate

All day, every day, conforming and FHA mortgage rates in Colorado are in flux.  Rates move in response to hundreds of factors which exact varying levels of influence.
Among the biggest influences on mortgage rates is inflation.  When inflation is unexpectedly high, mortgage rates tend to rise quickly. Conversely, when inflation is unexpectedly low, rates tend to fall quickly.
But what is inflation?
By definition, inflation is when a currency loses its value; when what used to cost $1.00 now costs $1.10.
As consumers, we recognize inflation by the items we buy on a daily basis becoming more expensive.  However, it's not that goods are more expensive -- it's that the dollars we're using to buy them have become worth less.
With respect to mortgage rates, this is a big deal because mortgage rates are directly related to the price of a special type of bond called a mortgage-backed bond.
On Wall Street, mortgage-backed bonds are priced, bought, and sold in U.S. dollars so as inflation renders those dollars less valuable, so it does to mortgage-backed bonds as well. It's a chain reaction by which mortgage bonds lose value, leading investors sell them, causing bond prices to fall on the excess supply.
And, because mortgage rates move opposite of bond prices, as inflation takes hold, mortgage rates rise.
Lately, inflation has been exceptionally low. The Federal Reserve acknowledged as much in its last statement to the markets, and available data backs that position.  This, after predictions that inflation would be "runaway" in 2010.
The Cost of Living is up just modestly this year and it's helping mortgage rates stay low. And, so long as it lasts, the cost of owning a home in Belle Creek will remain relatively inexpensive.

Conforming Loan Costs Are Rising, Says Freddie Mac

Mortgage rates may be dropping, but mortgage costs are not.
According to Freddie Mac, the average required discount points on a conforming mortgage rate are higher by 0.1 percent since early-May.
A "discount point" is prepaid mortgage interest; an up-front fee paid by a borrower in exchange for a lower mortgage rate. In most cases, discount points are tax-deductible.
Tax-deductible or not, though, rising costs are rising costs and Freddie Mac glosses over it.  In its weekly press release, the government group offers mortgage rate comparisons to weeks prior, but doesn't do the same for required points.
The press fails to mention discount points entirely.
An increase of 1/10 percent in discount points costs homebuyers and refinancing households in Henderson an extra $100 per $100,000 borrowed.
The hike reminds us that there's more to a mortgage than just its rate -- costs matter, too.  And if you've only been watching the headlines, you would have missed how costs are rising.