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Fixed Rate MortgagesVariable Rate Mortgages

mortgage interest rates Broadly, there are two types of home mortgages: fixed rate mortgages and variable rate mortgages (often called adjustable rate mortgages).  A fixed rate mortgage has an interest rate that is fixed for the entire duration of the loan (most commonly 30 years) while a variable rate loan has an interest rate that changes.  Variable rate loans are better known as ARMs (adjustable rate mortgages); the most common ARMs have interest rates that are fixed for a period of time and variable thereafter.

In both cases, it is ultimately the decision of the mortgage lender what interest rate to charge on the loan.  Of course, lenders that want to stay in business have to charge competitive interest rates that are on par with what other lenders are charging.

Home mortgage rates tend to fluctuate with the economy.  When the Federal Reserve Board wishes to stimulate the economy and increase employment, it reduces the discount rate at which banks can borrow money from the Federal Reserve Bank; when the Fed is concerned about inflation, it raises the interest rate for bank borrowing.  The discount rate indirectly affects the federal funds rate at which banks borrow money from each other.  When banks can borrow at low rates, mortgage rates also tend to be low; when money is tight and banks themselves are paying high interest rates to the Fed, home mortgage rates also tend to be high.

Long-term inflationary expectations also affect home mortgage rates.  When the federal government runs large deficits, it tends to result in higher inflation, so long term mortgage rates are likely to rise also.

Mortgage Rates and Quotes

  • Bankrate.com
    This personal finance resource features current mortgage rates and interest rates, as well as calculators and mortgage rate trends.  Use these handy mortgage calculators to calculate payments on mortgages and loans.  Featured listing.
  • Crown Financial Calculators
    Crown Financial provides several calculators to help you evaluate the costs of buying a home and obtaining a mortgage.
  • Yahoo Mortgage Rates
    Features current home mortgage rates by State and by Metro Region.

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