The Difference Between Prime Rates and Mortgage Rates

Don’t feel bad if you’re confused by prime rates and mortgage rates.  Most Americans are equally confused so you aren’t alone.  Let’s take a moment and see if we can’t clarify it a bit since this is something you might need to know the next time a relocation occurs.

The prime rate is the interest rate that commercial banks charge to their best borrowers….their prime borrowers.  It is based on a number of factors including the bank’s cost of funds, savings rates, availability of money, the economics market and the banks desirability to loan money.

The mortgage rates are influenced primarily by the bond market and competitive conditions.  They are offered on what is called the secondary market, namely Fannie Mae, Freddie Mac and private loan buyers.  If bond rates increase there is generally a corresponding increase in mortgage rates.  The same is true if a decrease occurs.

Usually the only relationship between the two is in reference….you will hear someone say that the mortgage rate is five percent over prime, but other than that, for the average homeowner or home buyer, the mortgage rate is the only rate you need to be concerned with.

Do you have a real estate question? How about a question concerning athlete relocation?

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Sports Relocation, Inc. Sports Relocation, Inc assist players/coaches of all professional sports leagues including the NBA, WNBA, NFL, MLB, NHL, and entertainers relocate nationwide by servicing their Real Estate & Relocation needs. Ikem Chukumerije is licensed to practice real estate in New York, California, Nevada, Florida, & Georgia. Sports Relocation, Inc operates nationwide and provides elite athlete relocation services in all 50 states and internationally.