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A Wisconsin Mortgage is simply a loan on a Wisconsin home, and a mortgage rate is the interest rate on such a loan, and you can’t imply to just one establishment, such as the bank, or the Federal Reserve that determines a mortgage rate.
Interest rates in Milwaukee are always changing and different types of loans will offer various interest rates.
You will find that as soon as you follow the trail, you will discover a much more complex and interrelated web of factors that go into what determines mortgage rates.
How Are Mortgage Rates Determined in Wisconsin?
Many borrowers who do not understand how interest rates are determined usually believe that it is the lenders who make these rates up and have control of the changes. This is certainly not the case, these mortgage rates are actually determined by what is called the Secondary Market.
The secondary market consists of investors who purchase these loans in which the banks, brokers, lenders, etc. have created for them to do so. They would then either hold these loans for their own earnings or simply bundle them up and sell them to other investors.
When these bundles of mortgages are up for sell by the secondary market, there are the end investors who will pay a certain price for these loans.
The more investments made towards Mortgage Backed Securities (MBS), the lower the rates, this is what impacts mortgage rates in Milwaukee.
Investors typically will accept a lower return on mortgage backed securities because of the safety of it in comparison to other investments.
Investors believe it to be safe, because of the government’s implications of backing up Fannie Mae and Freddie Mac, as well as the fact of the Mortgage Backed investments being based on the collateral of real estate. In case the loan does default there is real property pledged against potential losses.
In comparison, other investments are considered to be more risky, specifically stocks, which are based on earnings and profit vs. real property. The movement between the two investment vehicles often dictates mortgage rates.
Why Do Mortgage Rates in Wisconsin Change?
The fluctuation of mortgage rates in Wisconsin are impacted by the market’s viewpoint of how well economy is doing. The rate of return is expected to be higher with stocks, due to the fact that it is a high risk investment.
With the perception of the economy doing better, it is assumed that the companies will do better as well, and when this does happen you can expect the rate to go up also.
When Stock prices does go up, MBS prices will usually drop because of it, think of it as a teeter totter effect. So when the economy is thought to be doing poorly, Mortgage Backed Securities tend to thrive.
When investors are alerted a faltering economy, they worry that the return on stocks will be lower, so they frequently engage in a ‘flight to safety’ and would start buying more secure investments such as Mortgage Backed Securities. This is why mortgage rates in Milwaukee change so often, it is generally based on the yield of those Mortgage Backed Securities.
Based on the value of the their relation to other available investments, Bonds are sold at a particular price. When a bond is sold, it yields a certain return based on that original price. When the investors are seeking safety, the
MBS increases and the yield will then decrease. However, when investors seek the higher returns of stocks and the MBS are purchased in lesser quantities the price goes down.
The lower results in a higher yield, and this yield is what determines the mortgage rates in Milwaukee.
How Would I Know to Expect When Rates in Wisconsin Will Fluctuate?
You can expect it to go up when:
When the economy is growing, or is expected to grow, stocks will likely become the more favored investment, and when investors buy more stocks, they purchase fewer MBS, which drives the price down.
When the prices of the MBS is lower, the yield increases.
Since mortgage rates are based on the yield of the 30 year MBS, you would expect rates to increase in this environment.
You Can Expect Rates to Go Down When:
When the economy appears to be slowing or doing poorly, investors typically move their money out of the stock market and into the safety of the MBS. This drives the price of these investments higher, which will then result in a lower yield.
Since mortgage rates are based on the yield of the 30 year MBS, you would expect rates to decrease in this environment.
Since these market variables and expectations change so many times as economic reports are released throughout the course of the week, it is not uncommon to see Milwaukee mortgage rates change several times a day.
Being able to understand how the rates move is not necessarily as important as having a loan officer that is equipped with the technology and professional services to track and stay alerted at the precise moment rates can make a move for the better or worse.