VA LOAN CAPTAIN BLOG & Learning Center

VA Rates and Attitude

By: Grant Moon 09/12/14 10:58 am

If you think VA lenders raise their interest rates because they’re having a bad-hair day that’s not the case. For those not in the loop though it may seem a bit random at times but the randomness happens at all lenders at pretty much the same time. It wouldn’t be surprising to find out that a lender raises rates independently of others when they simply need to catch up on their work and there are too many loans in the pipeline. That’s the rumor anyway. But pricing loans does in fact follow a pattern and why if one lender raises or lowers mortgage rates the rest of them do, too.

VA rates are tied to a specific mortgage bond and like all bonds when the price of the bond goes up, rates go down and vice versa. Investors buy all sorts of bonds as they know the rate of return at maturity and can buy and sell that asset during that time. Yet bonds aren’t designed to provide a lot of profit but made to offer security. Knowing what a return will be at a future date means the investor can park some funds in bonds while searching for higher yielding investments.

When investors are excited about the economy, money moves out of bonds and into stocks and mutual funds and when investors are scared of the economy the opposite happens. In essence, in good times rates go up and in bad times rates go down. Any daily change is simply an adjustment in attitude based upon current events.

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