Current Mortgage Rate Predictions

1098 mortgage interest statement

Mortgage Interest Statement - Making mortgage rates prediction is a little difficult. Money markets, including those which set share prices and mortgage interest rates, are chaotic systems. This is not to say they are chaotic in the common usage of the term, meaning something with no order to it at all, but they are chaotic in the mathematical sense, in the formulas which explain how mortgage rates are determined, which are the formulas used to make mortgage rates prediction, have self-referential components.

Making mortgage interest rates predictions is like making weather prediction - it’s impossible to be precisely accurate with mortgage interest rates predictions, and the further in advance you attempt to predict mortgage interest rates, the bigger the margin of blunder in the prediction.

On the other hand, chaotic systems are predictable in broad terms.

If you think about predicting the weather, you may not be ready to forecast the top temperature for a given day in August, but you can fairly sure it is going to be within a certain range - say, if you live in Orlando, between 80 and 95 degrees F, and if you live in Copenhagen, between sixteen and twenty-five degrees C.

Just as climate gives a broad indicator of summer top temperatures, economic environment gives a broad indicator of mortgage interest rates.

Factors Which Make Mortgage Rates Rise : Inflation

So called “real interest rates”, the rates which move replying to supply and demand in the money markets, are independent of inflation. To get from the “real interest rate” to the “nominal interest rate”, which is what your bank will charge you for your mortgage, you simply add on the annualised % Rate of inflation.

Factors Which Make Mortgage Rates Rise : Reduced Availability Of Credit

Financial markets operate on supply and demand. If there is a limited supply of anything, then it will go to those who are willing or able to pay more for it. The same is true for mortgage money. Mortgage rates prediction will take under consideration whether the provision of cash is skyrocketing or decreasing, and likewise, the trends in demand for money.

Factors Which Make Mortgage Rates Prediction Rise : Increased Risk

Apart from the underlying real interest decided by the wider economy, the rate of inflation, and the provision of cash available for mortgage lending, there is another factor which comes into play in any investment decision - risk. Mortgage rates often will rely on the final risk involved in the housing market.

If house values plunge, as they have in some bits of the US, then the default risk for the banks suddenly increases, that means that they will be needing to charge higher mortgage interest rates ; prediction will take this upward pressure into account.

Factors Which Make Mortgage Rates Prediction Fall : Regime Intervention

The US Government is an 800-pound gorilla in the money markets. By issuing Treasury bonds at different interest rates, the government can influence the general market for money, and therefore affect the “real” interest rate.

Mortgage rates prediction based on purely economic considerations might indicate that mortgage rates are due to rise, but while the political pressure is running high, and in an election year, the govt Will do everything in its power, however economically irresponsible in the long term, to push the interest rises off until after the November elections. Mortgage rates predictions must take this political distortion of the financial markets into account.