Mortgage Interest Rates

interest rates

Many of us would like to predict where mortgage interest rates are going. After all, a change of mortgage interest rates of just one percentage point in either direction will affect many other rates in the economy, and will no doubt somewhere lead another family to the brink of being homeless.

can we predict interest rates?

Sadly, second-guessing mortgage interest rates requires a crystal ball, a sprinkling of fairy dust and a magic wand, all of which are yet to be invented. However, it is possible to predict within a certain degree of accuracy where interest rates are headed. You simply need to learn how to read market trends, to be able to correlate two separate data streams and be aware of what's happening in the economy.

It's important to remember that mortgage companies have their own methods with which to set individual rates. However, they do like to adhere to similar factors when considering their rates, and we as consumers can use these factors to predict where their rates are headed.

predicting interest rates

Firstly, you need to look at the previous base rate from the Bank of England during the last ten years. More often than not, mortgage interest rates will follow the Bank of England base rates precisely (as in a tracker mortgage); this is because if they fall any lower lenders will operate at a loss.

This is basic economics, also considering that the government is often rather competent when it comes to economics when compared to the family man with an unpaid mortgage around his neck.

Secondly, you need to look at where inflation rates are headed. Bear in mind the fact that there is a direct and almost correlative relationship between mortgage and interest rates. Again, it will all come down to commercial businesses since investors will always demand a better rate of return regardless of the state of the economy.

This means when the rate of inflation goes up, mortgage rates are pretty much bound to follow in the same direction.

Finally, you should look at trends. As we know history repeats itself often, particularly when it comes to the economic cycle.

But take great care when drawing your conclusions, as many of today's modern day dynamics may have not been around previously.

keep in mind...

When all said and done, just keep in mind that mortgage interest rate predictions are just that - predictions. This means you should not be greatly concerned when your estimate or prediction is off by a few percentage points, this is simply because you have no crystal ball, no sprinkling of fairy dust and no magic wand at your disposal to predict such matters.