Mortgage Bank Rate

In this paper, we will discuss about mortgage bank rate or mortgage rate. We will define mortgage bank rate and analyze that upon which it depends. The mortgage is of two types, fixed rate mortgages and adjustable rate mortgage.
Many consumers do not have a clear idea about the nature of mortgage rates.Mortgage bank rate, or mortgage rate, means the interest rate charged by a bank on a mortgage loan. Most of the consumers are used to think that the mortgage bank rates are dynamic in nature, that is, every now and then change due to some unknown reasons.

Therefore, they get confused about the upcoming mortgage rates and their effects on the economy.However, mortgage bank rates depend upon several economic factors. These are, unemployment percentages, stock and bond behavior, inflation, present scenario of the money market, gross domestic product, producer price index, consumer price index etc.
Adjustable Rate Mortgage: The interest rates for some mortgages may change due to some fluctuations in the Treasury Bill rate. Those kinds of mortgages are called adjustable rate mortgage. The main aim of these changes is to parallel the mortgage bank rates with the present market rates. The mortgage holders are protected by a maximum rate of interest, which is called ceiling, that may be reset yearly. The adjustable rate mortgages normally start with better rate compared to the fixed rate ones.
Fixed Rate Mortgage: In case of the fixed rate mortgages (FRM), the interest rates remain constant through out the whole period of loan. Here, the rate of interest is slightly higher compared to the Treasury Bill rate. The payment for each month equals to the interest on principal. The advantage of FRM is that the monthly payment amount doesn’t change, but the rate of interest is higher compared to the adjustable rates.

 

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Last Updated on : 30th July 2013