Understanding Interest Rates

…service and mortgage expertise.

What moves interest rates? It's a little complex, but there are some constants than can be tracked and evaluated.

The bond market
The performance of the U.S. bond market is one very key factor. Generally mortgage interest rates move in tandem with changes here. Lenders such as Chicago Bancorp Direct™ use formulas to determine interest rates based on the bond markets daily movement.

The United States economy
When and if the Federal Reserve changes its prime lending rate to attack such economical ills as inflation, banks also change their lending rates. Rates may also rise if there is more demand for home loans and simply the opposite if there is less demand for homes and home loans. Higher rates can spur on-the-fence borrowers to make a quick purchase decision. When the economy is slow, consumers don't borrow as much, possibly leading to lower interest rates. When the economy is booming, demand for borrowed funds increases, leading to higher interest rates.

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