American Community Survey undertook a study recently and the results from the studies indicated that one out of every three Americans stay in a home for which they have paid their mortgage loans. When discussing about mortgage rates, you have to understand that there are of two variations. The Fixed mortgage rates have a fixed higher interest rate which is consistent throughout the loan repayment pattern. The adjustable mortgage rates which fluctuates periodically depending on the mortgage rate currently in the market. Here the Average Mortgage Rate is calculated generally.
How are these interest rates determined?
The main banks of a company determine the interest rates which need to be paid by a mortgage home owner. In USA there is a special forum which holds monthly meeting every 8months and studies the economy conditions of the country. Based on these facts the interest rate is set. People who are part of this forum are important people from Federal Reserve Bank and Federal Reserve Board. The forum is commonly known as the Federal Open-Market Committee.
What do you understand about the Federal Reserve?
The standards for most monetary policy in United States are set by the Federal Reserve. In USA they are around 12 Federal Reserve Bank unites and they are distributed in important US cities. Here they are under the reviews of Congress but they can take independent decisions regarding the country’s economy. The Federal Reserve earn money for the country through various interest collected in loans, dividends earned on foreign currency and various interests earned thru governmental loans.
How do you calculate the interst rates?
When the Federal Open-Market Committee has their monthly meetings they study the current economy situation of the country and also judge the liquidity that is available for funds. Here the basic formula is when the circulation of money in the country’s economy is abundant, the rates would increase and when it is in bad shape the rates would decrease. Here the rates would be calculated on a average basis. The main objectivity of these people is to keep the country’s economy stable and the employment scenario full.
What roles does the central bank play here?
When understanding about average mortgage rates, you have to understand that the central bank loans the money to the local retail banks at an interst rate which is largely discounted. The ordinary home loan owner takes the loan at an interest rate which is based on the amount of loan he undertakes and the duration of the loan. A common tactics undertaken by central bank would be to increase the average mortgage rates when they feel that they should deposit money and use the money for other purposes. The same bank would lower rates when they want the consumer to increase their spending.
What are the average mortgage rates?
The average mortgage rate would depend on the borrower’s current credit score, the first down payment that he has made and the specific loan variation that he has taken. The average mortgage rate currently for 30 years is 4.19%. For 15 years the rate is 3.34%. In both cases the rates are fixed mortgage rates.