WHAT is up with the mortgage rates these days? Well, I’m no finance expert, as many of us aren’t, so here’s the bit I know about. Maybe it’ll explain a bit. It doesn’t make the rate changes any easier to accept, though, sorry.
Low Rate History
Pre-COVID pandemic, the lowest rates seen in a while were around 3.6% in August of 2019. Mar of 2020, rates were at the then lowest of about 3.16%
What's Up With Mortgage rates?
As I understand it, the rates are driven by what’s called in acronym the MBS , or mortgage-backed security. Mortgage-backed securities are debt obligations purchased from banks, mortgage companies, credit unions, and other financial institutions and then assembled into pools by a governmental, quasi-governmental or private entity. These entities then sell the securities to investors. Essentially, the MBS turns the bank into a mediator between the homebuyer and MBS investors.
“…In return, the investor gets the rights to the value of the mortgage, including interest and principal payments made by the borrower. However, if the homeowner defaults, the investor who paid for the mortgage-backed security won’t get paid, which means they could lose money. Therefore, an MBS is only as sound as the mortgages that back it up, a fact that became painfully evident during the subprime mortgage meltdown of 2007-2008… “