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Consumers are somehow lead to believe that the various sources for mortgages—from banks like Bank of America to mortgage brokers like Lanning Financial at Guarantee Mortgage—get the money to lend to consumers from different places.  Somehow consumers are lead to believe that this is why some institutions offer higher or lower rates.  Not really true.

Business decisions drive mortgage rates

The actual money source from mortgages is pretty small.  It’s like a spring coming out of the side of the mountain.  In strong precipitation years, the spring flows freely and in low precipitation years, it flows more slowly.  Pretty much everyone goes there to get water.  Some years there are lots of people going to get water and in other years, few people are going to get water.  In comparison to the years 2002-06, we’re in a mortgage money draught. There’s not a lot of water.  There are also very few people going to get water.  But the water is pretty much the same.

Now, what each institution does with the water is different.  Some give it away for free. Some of them charge a reasonable fee.  Some overcharge for it.  That’s the difference in interest rates.  I often tell clients that we provide a competitive rate for our mortgages.  I never say we’re the “best rate” because some days we are and some days we aren’t and it’s impossible for me to know what’s so from day to day or even moment to moment.  Yet, I know that if we price ourselves in the market and remain competitive, and I know that my clients are well-served, if for no other reason than I need to sleep at night with a clean conscience.

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