Florida Mortgage Rates

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Florida Mortgage Rate Charts

Interested in what Florida mortgage rates have been doing over the past 30 days?

Check out our exclusive interactive charts showing the movement of interest rates on a daily basis to decide whether now is good time to lock or float.

How Are Florida Mortgage Rates Determined?

Florida mortgage rates A great deal of confusion exists among mortgage shoppers when it comes to how mortgage rates are determined each day.

The vast majority of mortgage shoppers believe that mortgage rates are “set” by lenders, the Federal Reserve, or some other entity. Even among more experienced shoppers for Florida home loans who know that no single entity determines rates, there is a misconception that mortgage rates follow the 10-year Treasury Note. And it’s no wonder…the mass media who informs consumers makes these same mistakes!

In actuality, mortgage rates are derived from mortgage-backed securities (MBS) which are traded daily on a mortgage bond market. Similar to stocks traded on the stock exchanges, individual investors decide how much they are willing to pay for MBS which in turn determines their price and associated rate (yield).

According to the U.S. Securities and Exchange Commission, mortgage-backed securities are defined as “debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property”. It is important to note that MBS mimic bonds in that there is an inverse relationship between the price of a bond and its rate of return.

In more simple terms, mortgages rates go down when the price of MBS goes up. Conversely, mortgage rates go up when the the price of MBS goes down. In the candlestick chart below which shows the daily price of MBS, green is good and red is bad for mortgage rates.

Florida mortgage bond market

What Makes Florida Mortgage Rates Go Up or Down?

Now that you know mortgage rates are derived directly from mortgage-backed securities, the next question that naturally comes to mind is what causes interest rates to go up and down. The answer to that question can be found by examining the flow of money that goes towards stocks versus bonds.

Fund managers and institutional investors are the principal investors in mortgage-backed securities. These investors typically do not like holding cash and constantly are moving money back and forth between stocks and bonds, including MBS, in an effort to attain the best rates of return.

When there is strong or positive economic news, investors buy stocks and sell bonds. With the supply of bonds exceeding demand, the price of mortgage-backed securities declines which causes interest rates to go up.

When there is weak or negative economic news, investors buy bonds and sell stocks. Demand now exceeds the supply of bonds leading to an increase in the price of MBS which in turn causes mortgage rates to go down.

Factors Influencing Florida Mortgage Rates

Financial market behavior, which affects the flow of money between stocks and bonds, mirrors human emotional behavior. This behavior is influenced primarily by two factors, technicals and fundamentals.

Technical analysis is the art of measuring repeatable patterns as well as historical levels of mortgage-backed securities to predict future prices and interest rates. Price moves occur occur because of what people do and human nature being what it is tends to be rather predictable. This is done by studying price charts (in particular, Japanese candle stick charts like above) and calculating retracement patterns through the use of Fibonacci numbers. The emergence of certain patterns (e.g. “Bullish Engulfing Pattern”) or approaching support or resistance levels often gives investors clues on the direction of prices.

Fundamental analysis is focused on the news, economic reports, actions and statements by the Federal Reserve and geopolitical events. Certain news and geopolitical events which lead to uncertainty or fear are of interest since a “flight to safety” causes money to flow out of stocks and to less risky investments like MBS. But this analysis is primarily concerned with picking up on clues about inflation which is the enemy of bonds and causes mortgage rates to increase.

Inflation adversely affects the fixed return provided by mortgage-backed securities by eroding its value. This is because a dollar today is worth more than a dollar in the future when there is “a rise in the general level of prices of goods and services in an economy over a period of time” (i.e. the definition of inflation).

For example, if you receive a fixed monthly payment of $1000 which is equivalent to the price of a month’s rent today, yet your landlord increases your rent next year to $1100 (10% inflation), then it is obvious that your fixed monthly payment of $1000 is worth less in the future than it is today when paying rent.

Investors compensate for the risk of a dollar in the future being worth less than it is today by demanding higher rates of return. Accordingly, mortgage rates rise when there is news of inflation.