A Simple Guide to Understanding Why Mortgage Rates Go Up or Down

A Simple Guide to Understanding Why Mortgage Rates Go Up or Down

You have probably noticed that the mortgage rates are not static. They are going to go up and down, which can be difficult to follow and understand. There are many different factors that can affect the rates, and those who are considering getting a mortgage are going to want to have a better idea of what types of things can cause shifts in the mortgage rates.

Economic Growth and Economic Indicators

The economy is the biggest factor that tends to cause changes in the mortgage rates. Growth in the economy can cause the interest rates to rise or fall. These rates are then mirrored by the mortgage lenders to make sure that they are able to stay profitable. When the economy is doing well, it means that the level of interest rates in the country is typically going to rise. When this happens, it means that the mortgage rates are generally going to rise, as well. Conversely, when there is trouble in the economy, it means that the mortgage rates are going to drop, just like the interest rates.

One of the main economic indicators that is used to determine what will happen with the rates is federal funds rate. Some of the other indicators that are used when determining what will happen with the mortgage rates include the producer price index and the consumer price index.


The policies in the government can cause fluctuations in the mortgage rates. If there are a large number of loans in a short period, the number of mortgage-backed securities can become higher than the demand. It can cause the interest rates to rise, and they are going to need to come down again to keep buyers interested.

The Federal Reserve is responsible for controlling interest rates and keeping inflation in check. They do this by adjusting the supply of money that is in the economy. If the economic growth, discussed earlier, creates too much inflation, there is a risk that the purchasing power is going to drop. To prevent this from happening, the Federal Reserve purchases Treasury Bonds. The added money from this influx can help to lower the interest rates.

Changes in the Real Estate Industry

You will find that the mortgage rates can be affected by happenings in the real estate industry, as well. When the demand for mortgage borrowing increases, based on an influx of new homes on the market, it can cause the mortgage rates to rise. When there is a weaker demand for new mortgages, it will typically cause the rates to fall.

The above include some of the largest factors that will affect the mortgage rates as they rise and fall. As you can see, there are many factors that can play a part in the mortgage rates. The lenders pay close attention to these factors, and this is something that you should pay attention to as a homebuyer, as well. It can become complicated to understand all of the ins and outs and just why the rates rose or dropped but having at least a basic understanding of the various things that can affect the rates will be helpful.

Naturally, when you are looking for a mortgage, you will want to make sure that you check the rates. If they are currently too high, it might be in your best interest to continue saving for a while and then get your loan when the rates drop a bit. You can – and should – speak with a mortgage professional to learn more about getting a mortgage.

Posted by MortgageApplyOnline On June 8th, 2018

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