Mortgage Rate
Categories: Mortgage
See: Mortgage.
Fixed or floating? What's the cost of renting borrowed money for that 3-bedroom, 4-bath, kitschy place, within walking distance to the university?
Banks borrow money "wholesale" from The Fed at, say, 2% interest. They then mark up the price of that money for risk and processing costs and corporate jets for the CEOs. They then "retail" those loans to customers, i.e. the actual borrowers at a mark up of, say, 150 basis points, or 3.5%. Sometimes that figure is fixed for 15 or 30 years, or some other weird number. Other times, it's adjustable and changes, based on whatever bank borrowing index drives pricing (LIBOR is a common one).
See: Adjustable Rate Mortgage.