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1. What Can You Afford >>
Quick Guide through the CT Mortgage Puzzle
KEY FACTORS AFFECTING CONNECTICUT MORTGAGE LOAN INTEREST RATES
When a client has chosen a Connecticut home mortgage loan program that will fit his needs, it is time to look at the Connecticut mortgage loan interest rates offered. This is another decision that can cause major confusion and frustration!
Analyzing Connecticut mortgage loan interest rates has often been compared to riding a roller coaster - up - down - sharp turns - steep dives and unexpected twists. Everyone involved in the Connecticut home mortgage loan industry needs a thorough understanding of what drives the daily fluctuation of Connecticut mortgage loan interest rates.
There are several key factors that affect Connecticut mortgage loan interest rates:
. The Federal Reserve Bank (the FED) 02
. Treasury Bonds
. The Stock Market 03
. National and International Events
. Economic Indicators 04
THE FEDERAL RESERVE BANK
The Federal Reserve Bank manages the nation's money. 05 They do this mainly by lowering and raising interest rates. The Fed sets the interest rates at which U.S. banks and other lending institutions can borrow money from the Federal government. 06 These interest rate policies affect the price of credit throughout the economy - including Connecticut home mortgage loan rates.
Interest charged on a Connecticut home mortgage loan is the cost of borrowing money. 07 Many factors affect rates but as with so many other aspects of our economy, the relationship of supply and demand plays a major part in determining rates.
The Fed can control the direction of the economy by raising and 08 lowering two key short-term interest rates: the Federal Funds Rate (the interest rates banks charge each other for overnight loans) and the Discount Rate (the interest rates the Fed charges banks for loans). These 09 two rates, especially the Federal Funds rate, are viewed by investors as the benchmark for short term Connecticut mortgage loan interest rates. The decline in short-term rates, including adjustable mortgages, will 10 accelerate if the Fed lowers the Federal Funds Rate.
When the Discount Rate is decreased, Connecticut mortgage loan interest rates tend to drop. When the Discount Rate is increased, Connecticut mortgage loan interest rates tend to rise.
The Fed also controls the flow of money by increasing the amount of money available to banks by selling or purchasing government securities on the open market. 12
When the amount of money available increase, Connecticut mortgage loan interest rates tend to decrease.
When the amount of money available decreases, Connecticut mortgage loan interest rates tend to increase.
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