10 Factors Affecting Rates on Investment Property

Predicting the rates on investment property is like gambling in the sense that there are a lot of factors that you would want to consider and yet, the results are still uncertain. Still, there are a lot of economic indicators that are affecting rates and investment property experts are using these barometers along with their experience and tested gut feeling to predict what will happen next. Here are ten factors affecting mortgage rates on investment property:

1. Bonds or mortgage-backed securities

The present rate of fixed rate mortgages are the most affected with the changes in the bond market rate, primarily treasury bonds. Individual mortgages are pooled together and sold as mortgage-backed securities and that is why any change in the interest rates on treasury bond affects mortgage rates.

2. Economic reports by major government agencies

Economic reports by major government agencies also affect mortgage rates and are used by savvy mortgage pros to predict mortgage rates.

3. Economic measures by the government

To keep rates down and to encourage home buying, the government has been very busy investing in major mortgage companies.

4. Unemployment rate

Since people buy less housing or even go down to foreclosure when unemployment rate is high, it is also a strong indicator of changes in mortgage rates.

5. Interest rates on Federal Reserves

When the interest rates on Federal reserve goes up, mortgage rates will also follow to compensate for borrowing from the government.

6. Economic condition

The economic condition is a major factor in the fluctuation of mortgage rates. When the economy is down, there is less house buying and mortgage rates will also go down. When the economy is booming, mortgage rates will also follow.

7. Inflation rate

Theoretically, rising inflation would drive demands for mortgage low for a period of time which will lead to decrease in interest rates overtime.

8. The mass media

The opinion of the mass media has great impact on consumer’s buying decision and this could lead to high or low interest rates.

9. Foreign exchange

Foreign exchange fluctuation can also lead to fluctuation in mortgage rates.

10. Unforeseen events

Natural calamities have great effects on mortgage rates when they do happen.

While there is no hard and fast rule to determine rates on investment property, these indicators can give you a lot of ideas regarding the way things are going. Just like in any form of investment, timing is essential and a lot of intelligent guesses.

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