How the Bond Market Relates to Your Mortgage Interest Rate

Lenders provide guidance on locking in an interest rate but it is ultimately your decision as to when to lock in an interest rate.  Waiting too long to lock in an interest rate could delay your approval or closing so this needs to be discussed with your loan officer.

Part of that responsibility of deciding when to lock the interest rate and points is monitoring the mortgage rate markets.  Mortgage interest rates are based on Mortgage Backed Securities (MBS) or bonds and change daily based on a number of national and international economic factors.  You may be told to “watch the bond market” as an indicator of rates.  What does that mean?

The 10 year bond is most familiar and most easily monitored.   Many newspapers show that in a small box on the business page along with the Dow and Nasdaq numbers.  It can also be readily found online.  Keep in mind this is only an indicator.  The number you will see quoted is the bond yield.  If bonds sell high then the yield will go down and mortgage interest rates will go down.  If bonds sell low, yield goes up and then mortgage interest rates go up.

It is really that simple.


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