Why Do Mortgage Rates Go Up and Down?
Thinking of buying a home? Interest rates related to mortgages are known to go up and down frequently, changing each week and even fluctuating dramatically as the decades roll on. Why is this?
1. The Federal Reserve
The Federal Reserve is responsible for keeping the balance between the nation’s unemployment rate and inflation. When the economy begins to not do so well, and a higher number of American citizens are unemployed, rates lower. On the other hand, when the economy shows signs of progressing well, mortgage rates are higher in order to protect this balance.
2. Competition Between Lenders
In some areas, the number of borrowers is lower or the market is known as “a buyers’ market.” Those who are selling homes, or lenders offering loans tied up with mortgage rates, are dealing with far less potential clients and a higher amount of competition with each other. This is when mortgage rates will be shown as lower in these areas. On the contrary, when there are far more buyers than there are lenders or other means of home loan competition, mortgage rates may be seen as higher.
3. The Nation’s Economy
As mentioned earlier, mortgage rates and their fluctuation largely depends on the economy and keeping a good balance throughout the nation. Therefore, the state of the economy is a very significant factor in interest rates at any given time. The number of unemployed individuals contributes to the economy and rate fluctuation, as does the amount of individuals demanding a home to live in. Simply put, if citizens are not doing well financially, they are far less likely to buy a home. And if fewer individuals are able to purchase a home or are seeking to apply for home loans, mortgage rates will differ than when more citizens are seeking to buy a place to live.
4. The Economy of the Globe
A surprising contributor to the fluctuation of mortgage rates is the global economy. If foreign concerns, such as outside fuel costs, contribute to the boosting of our nation’s economy mortgage rates are likely to increase. Of course, the opposite is true – if foreign affairs contribute to the fall of the economy’s success rates are likely to drop.
In conclusion, there are a variety of factors that determine whether or not mortgage rates rise or fall. Therefore, examining the economy and the rates in your area will aid you in selecting the right time to purchase a home.