There are mainly two types of mortgage loans found in El Paso lending scene. That is the fixed rate and the adjustable rate mortgages. The fixed rate mortgages attracts a fixed interest rate no matter the market changes, while the adjustable rate mortgages attracts interests that vary with market forces. However, many borrowers that have applied for an adjustable rate mortgage never know what may affect the change of the interest rates that they are paying. That is why this article will pay great attention to the elements that causes change in interest rates for the adjustable rate mortgages.
Supply and demand of the mortgage loans Similar to any market, the lending scene in El Paso is influenced by the supply and demand for the mortgage loans. There are times that many people look for funds to purchase homes in the city, while in other times, there are no mortgage borrowers. During the high season for mortgage loans across El Paso, there are very many borrowers seeking shrinking number of mortgage loans available in the market. This therefore causes an imbalance of the two which affects the interest rates to the high. Similarly, during the times when there is low demand of mortgage loans, the interest rates tends to be low as mortgage lenders compete for borrowers. Inflation levels of the country Another element that plays a key role on the change of interest rates is the inflation of the country. Once the country’s inflation levels are raised, the value of the money becomes low and the prices of commodities including homes becomes high. This in turn forces mortgage lenders to find ways in which they can recover the value of their money, thus increasing the interest rates. on the other hand, when inflation is low, the interest rates tends to lower as lenders do not have to compensate on the decrease of the purchasing power of the money that borrowers will pay in the future as monthly installments. Government Policies There comes a time when the government comes up with policies which it thinks will help their discharging of services. These government policies may either raise of lower the interest rates, depending on what they are meant to achieve. For instance, the United States government sponsors some of the mortgage and home loans across El Paso like FHA and USDA home loans. This in turn lowers the risk of defaulting on the mortgage, as lender have a fallback position. Due to the low risk of mortgage loans, the interest rates tend to lower to the delight of the mortgage borrowers. However, it is important to note that some government policies may make interest rates to surge.
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