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Mortgage loan rates are heavily influenced by the secondary
mortgage market where national investors, such as Fannie
Mae or Freddie Mac,
buy mortgage loan products from lenders.
The best mortgage rates typically happen when the economy
slows down because investors speculate the Federal Reserve
will cut mortgage rates in the future to help the economy
improve.
When the news suggests that the economy is improving, mortgage
investors speculate that the Federal Reserve will raise
interest rates in the future to control economic
growth and inflation. Lenders then have to charge higher mortgage
loan rates in order to sell
to their investors.
Reports Indicating the Direction of Mortgage Rates:
Consumer Price Index - One of the most
important indicators of inflation. Higher inflation means
increasing home mortgage rates, lower inflation means decreasing
home mortgage rates.
Employment Cost Index - Measures the change
in wages, salaries and benefits. It is important because
rising labor costs can force businesses to raise prices, which
can increase rates.
Gross Domestic Product - Measures the nation's
total economic output. Strong
growth can cause demand to
exceed the supply, allowing businesses to charge more,
increasing rates.
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