What Factors Impact Mortgage Rates?
| Posted in News, Highlighted Posts, Home Loans
The Fed recently cut interest rates by a quarter point. There is a lot of chatter on how this could impact mortgage rates, so we’re here to break down what factors that influence mortgage rates.
Let’s start by discussing Prime Rate. Prime is essentially the “best” interest rate a bank is able to offer to a customer. It is controlled by the Federal Reserve and directly impacts car loan rates, Home Equity Lines of Credit, Installment Loans, credit cards, and other consumer loans. It’s often held as a benchmark for interest rates. The PrimeRate does not directly affect long-term fixed rates, such as 10 to 30-year fixed rate mortgage loans.
Mortgage Rate Factors
Major economic impacts that affect fixed rates (such as mortgages) are government treasury bonds, treasury bills, other long-term government investments, the stock market, and inflation. In addition to this, our mortgage lenders keep a close eye on various government policies as well as supply and demand to have an idea of where rates are headed.Federal Reserve and Monetary Policy
When interest rates increase to curb inflation, mortgage rates typically follow suit. On the other hand, when interest rates lower, mortgage rates may decrease but other factors come in to play.
Supply and Demand
A strong economy with low unemployment rates can push interest rates up due to increased demand for loans. In general, when there is a high demand for mortgages, the mortgage market may increase rates to help find balance between supply and demand. On the flip side, when there is an abundance of homes for sale, and the demand for mortgages is lower, this can lead to lower mortgage rates to help attract new home buyers.
Government Policies
Various government housing and tax policies can also influence mortgage rates. Housing policies could include changes to FHA, VA, and USDA loans. When more lenient credit requirements are offered, homeownership is more accessible. In the same token, stricter eligibility criteria can impact mortage rates and availability. Additionally, first-time homebuyer tax credits will increase demand for housing, thus increasing rates, which goes back to the point on supply and demand.
Stay Updated on Mortgage Rates
If you’ve been keeping your eye on mortgage rates for some time, you know they can change in an instant. To stay up to date NEBAT recommends connecting with a local mortgage lender to help guide you through financial decisions having to do with your mortgage.
The NEBAT Home Loan App also provides a wealth of information in the palm of your hands.
Download on Google Play Download on the App Store
