Staying On Top of Mortgage Interest Rates
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With all the changes going on in the real estate industry – almost on a daily basis – it makes perfect sense to want to stay ahead of the game and know what the interest rates are doing on the market. One way is to search online, where countless generic interest rate calculators will tell you nothing more than a range that you can go by. But if you want a more accurate reading, one of the best-known industry secrets is to use the ten-year Treasury bond as a gauge. By tracking the ten-year Treasury note, you get an insider’s view of how interest rates are moving.
How Do You Calculate the Current Interest Rate?
The formula is very simple. Determine what the ten-year bond is at – and simply add two hundred basis points to that number to find out the current interest rate. So for example, if the ten-year note were at 200 basis points, then you would add 200 more to get to 400 – which translates to a 4% interest rate. When you notice the bond going up – you can safely assume that so will interest rates. Conversely, when the ten-year bond note goes down, the same thing will likely happen with interest rates.
What Other Factors Affect Interest Rates?
Keep in mind that while this is a great way to stay on top of interest rates, it does not translate to the exact rate you might receive on a loan. Other factors that determine what the interest rate will be include things like the borrower’s credit score and profile, the amount of down payment put on the house, the type of loan (FHA, conventional, other) and also the loan to value. The price of mortgage bonds, of course, indicates interest level activity as well. On a general level, interest rates are also largely determined by the unemployment outlook as well as consumer confidence.
How Does This Benefit Most People?
One of the best things about knowing where things seem to be headed is of course if there are any questions about the interest rates you may see advertised you can confirm actual rates with this tool. If you see something that does not look right or need better accuracy, this is the way to go to base where the market needs to be. It is important not to consider the ten-year bond price – rather it is the yield that indicates interest rate levels.
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This technique is ideal for almost anyone. Consumers, buyers, sellers, Realtors and financial planners – all utilize the ten-year Treasury bond as a measuring tool to be able to gauge in advance how the market might be performing in terms of interest rates.
