How Interest Rates Work

   
How Mortgage Interest Rates Work?
Interest rate on mortgages fluctuate on daily basis. The difference in the today mortgage interest rate and the mortgage interest rate tomorrow may be of only a few points, but these few points too make a big difference.
 
 
In order to get an accurate today mortgage interest rate you need to take a good look at the trends in the factors that determine the mortgage interest rate. There are various macro level and micro level factors that determine whether the today mortgage interest rate will rise up or see a downfall. Let us see what are these factors.

Macro level factors affecting today mortgage interest rate:
Macro level factors are those that are related to the economy as whole. They would include:
- Inflation Rate: A rise in inflation rate in the economy leads to rise in mortgage interest rates too. As higher inflation indicates growth in the country's economy inflation rate depends on various indicators like Consumer Price Index (CPI), Producer Price Index (PPI), rise in Dollar rates, etc.

Inter Bank lending rates: Mortgage rates widely depend on the movement in the credit market, which includes many financial intuitions like banks. Thus the fluctuation in rates at which inter bank lending takes place results in fluctuation in mortgage interest rates too. Thus change in Federal Fund Rate, LIBOR (London Interbank Offered Rates), 12-month Treasury average (12 MAT or 12 MTA), Cost of Funds Index (COFI), and Constant Maturity Treasury Index (CMT) indicates change in today mortgage interest rate.

Stock Market: The stock market and mortgage market have a great effect on each other. That's because mortgage rates basically depend on the fundamentals of demand and supply and ups and downs in the stock market have a major impact on the credit supply in the financial markets.

 Also if you make higher down payment or discount points, lower will be the interest rate quoted to you. Your credit history and your current credit rating have a key role in reckoning the today mortgage interest rate.