Mortgage-Backed Securities and Their Effect on Rates

Many mortgages are pooled into mortgage-backed securities, often called MBS, that can be purchased by investors. This process brings capital back into the mortgage system so lenders can continue making new loans.

Investors compare MBS with other fixed-income investments while considering repayment and prepayment risk. When demand for mortgage bonds improves, mortgage pricing may benefit; when investors demand higher returns, mortgage rates or costs may rise.

This lesson is general educational information, not individualized financial advice or a mortgage-rate quote. Loan programs, rates, fees, and eligibility vary by borrower, property, lender, and market conditions.

Source and further reading: Housing Brief / MBS Live Mortgage Education Library. This lesson is an original explanation by the Carson Home Team; source text is not reproduced.