All About Mortgage Interest Rates
The lender that provides funds for your home purchase is known as the originator. An originator can be any financial institution (bank, credit union, etc.). After funding, and closing the sale, the originator decides whether to maintain the loan in its portfolio, or selling the loan off on the secondary market. If the originator chooses to keep the loan, it will profit from the interest you pay each month.
When sold on the secondary market, you'll end up making payments to the buyer of the loan, while the originator takes in a lump sum for the purchase of your loan and is able to make loans to others. Essentially, ensuring that originators don't run out of money to make loans.
The investors in the secondary market are government-chartered
organizations (Freddie Mac & Fannie Mae), as well as insurance companies,
and public & private investment firms. These entities buy mortgages, and group these mortgages together for sale of mortgage-backed securities (liquid investments). Since investors want to earn the most they can, they will wait to purchase mortgages with high return yields. When the economy is in a period of prosperity, this drives up mortgage rates. During an economic downturn, they'll buy what they can to avoid low returns later on, driving mortgage rates down. Being aware of economic trends and doing some mortgage planning, you can compare rates, and lock in the best rate for you.
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