What is a mortgage bond?

This is what’s known as a mortgage bond, and it’s a type of mortgage-backed security (MBS). Mortgage bonds protect lenders and make it possible to invest in real estate at an affordable price point. This article will explain what a mortgage bond is and how it affects the real estate market.

Why do investors buy mortgage bonds?

Investors typically purchase mortgage bonds because they’re looking for a reliable and safe income stream. Most investors favor mortgage-backed securities over Treasury bonds. They believe an MBS is a safer investment because they are backed by real property and the U.S. government.

How do bonds affect mortgage rates?

Mortgages and the bond market have an inverse relationship with each other. If bonds are expensive, that means mortgage rates will be low. When bonds are inexpensive, mortgage rates will be high. A government-sponsored enterprise is a government-regulated financial services corporation created to improve credit flow in certain parts of the economy.