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Interst rate questions

Regular Contributor

Interst rate questions

How does a loan go from 4.125, to 4.25 to 4.5 in less than a week?  Just curious on interest rate quotes.

Message 1 of 5
4 REPLIES
Regular Contributor

Re: Interst rate questions

I locked in yesterday at 4.75%.


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Message 2 of 5
Moderator

Re: Interst rate questions

Rate floats until you lock it in.

 

Rate is tied to the 10 year Treasury bond, when bond rates (not bond prices) go up, interest rates go up. So to see where rates are going, look at the 10 yr bond yield. If the bond yield is going up, then so are rates.

 

To make matters even more confusing, an individual lender /can/will add to their own individual interest rate if they are trying to discourage loans in a particular sector (eg. auto loans, mortgage loans etc). Or, they can offer lower rates if that individual lender is trying to boost their loan portfolio in a given sector.

 

Google interest rates to get a better idea, it can get complex in very short order!

Message 3 of 5
Regular Contributor

Re: Interst rate questions

Ok thanks i understand we just locked at 4.5 it was trending upwards fast.

Message 4 of 5
Super Contributor

Re: Interst rate questions

It's speculated that the Fed will taper (i.e. reduce) their bond purchasing program in the next 30-60 days.  The main reason for the rock-bottom interest rates, and the decrease in interest rates over the 4 years is the Fed had a program called quantitative easing where they purchased billions/trillions of treasuries in an effort to drive interest rates down lower and jumpstart the economy.  Since the economy is doing much better now they have announced they will taper the bond buying program and so the result of that is interest rates will increase.  This is the main reason that interest rates have increased around 1.25% since April.

 

http://en.wikipedia.org/wiki/Quantitative_easing#United_States_QE1.2C_QE2.2C_and_QE3

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