Interest Rates and Your Mortgage – pret hypothecaire

One of the most critical decisions to make when you are buying a home is to time the interest rates exactly right. Will interest rates increase, in which case you should lock in a fixed rate home loan for as long as you can, or are they headed down, which means you want to either wait to buy or refinance, or choose a rate that adjusts frequently?
The interest rate on your mortgage will be influenced by many variables and economic indicators, and having a basic concept of these will help you make your decision – pret hypothecaire. The price of money is interest rates, and if you understand what will affect the price of money, you will understand what affects interest rates, including your mortgage rate.
Inflation is one of the very important influences on interest rates. There are two major culprits when it comes to inflation. These are the PPI and the CPI, the producer price index and the consumer price index.
PPI or Producer Price Index is a measure of changes in prices at the level of production. If PPI is rising, this will mean that the cost of finished goods is higher, which will lead to inflation.
The Consumer Price Index (CPI) measures the change in prices of a fixed “market basket” of consumer goods. This is a very critical signal of inflation since it is what we will all pay for our goods. Certain segments of CPI can “skew” the percentages, so analysts frequently remove changes in food and oil prices, which are often too volatile. The volatile categories of food and energy can skew the inflation rate, while core inflation gives a better measure if overall prices are on the rise, causing inflation.
GDP is another fairly good predictor of inflation as well as interest rates. The Fed (Federal Reserve Bank-the Central Bank of the United States) is responsible for maintaining the economy on an even keel-not a lot of growth, which will cause inflation and not too little, which may cause a recession. The Fed has the power to intervene in the economy in a number of ways so that it can decrease rates to slow the economy down and increase rates to speed it up.
The unemployment rate is another major part of the economy that affects interest rates. Low unemployment tends to lead to inflation, since it will lead to higher wages which leads to higher prices. High unemployment will typically lead to lower interest rates since it means lower wages and consequently lower prices In other words, increased wages lead to a wage price spiral and decreased wages bring prices down.
It can be very beneficial to a prospective homebuyer to keep track of these kinds of economic indicators to know what is happening in the interest rate arena. Normally, a slow economy with elevated unemployment will mean that rates will be falling. Increasing GDP and low unemployment means the economy is heating up and you can expect increased interest rates in the future.
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