What Makes Mortgage Rates Fluctuate?

Published: May 15, 2019

If you have plans to take out a home loan in the near future, you may be curious about current mortgage interest rates. This may be especially true if you're thinking about taking out a variable rate mortgage, where your interest rate can rise and fall with market changes. Either way, having a general understanding of what makes mortgage rates fluctuate can help you make better informed decisions regarding your own borrowing.

The Economy 

Changes in the economy can have a huge impact on mortgage rates. For example, when the economy is doing well, people tend to have greater levels of personal wealth, which in-turn drives spending. As a result, it is common to see low-interest rates during this time as a means of encouraging spending within the housing market. When the economy is a little more sluggish, on the other hand, it is common to see rises in interest rates as banks seek to make back lost profits.

Market Changes/Inflation

Typically, home loans are grouped into larger securities, so the market for these types of investments can also affect interest rates on mortgages. This is all tied back to the relative value of the dollar. As inflation occurs, it is common for interest rates on all types of loans (including mortgages) to be increased as a means of protecting the value of the dollar. On the flip side, when inflation isn't imminent, interest rates tend to be lower.

Global Factors 

Political unrest, foreign competition, unemployment, and other global factors can all affect mortgage interest rates, as well. When the global economy is unpredictable or unstable, this can cause the Federal Reserve to increase interest rates to increase rates in anticipation of inflation. As a result, you'll generally find that interest rates increase when there is instability or global conflict.

Securing the Best Mortgage Rate

These are just a few of the most influential factors when it comes to mortgage interest rates. Ultimately, the best way to secure the lowest rate is to understand the market and time you’re borrowing accordingly. County Federal offers a wide range of home loan options with great interest rates to help you make your next home purchase. Contact us today to find out more!