As you may already know, mortgage interest rates are significantly influenced by the secondary mortgage market where national investors, such as Fannie Mae or Freddie Mac, buy various mortgage loans from brokers and lenders. Clearly, supply and demand driven by the economy determines the current mortgage interest rates that will be available with local and national mortgage lenders.
The lowest mortgage rates occur when the economy staggers because banking investors speculate the Federal Reserve will lower mortgage interest rates in the future to help the economy improve.
When the current events and financing news hints that the economy is improving, mortgage investors speculate that the Federal Reserve will increase mortgage interest rates in the future to control economic growth and inflation. Mortgage lenders will then need to raise home mortgage interest rates in order to sell their packaged loans to the Wall street investors.
Consumer Price Index - Very important indicators of inflation. Higher inflation means increasing home mortgage rates, lower inflation means reducing rates for home mortgage loans.
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 cause the home loan rates to rise.
Gross Domestic Product - Measures the nation's total economic output. Strong growth can cause demand to exceed the supply, allowing businesses to charge more, raising interest rates.
As you can tell, there are a lot of forces and factors that drive and determine the interest rates for home equity loans, home puchases, and refinance loans.
