What causes changes in mortgage rates? There are any number of reasons for mortgage interest rates to fluctuate and we’ve broken down some of the more common reasons to help you gain a better understanding of this ever-evolving market.
Mortgage Bond Prices:
Interest rates and mortgage bond prices are inversely related. If mortgage bond prices go up, interest rates go down.
Generally speaking, when economic reports/conditions are positive, interest rates will rise. Just this week, the report on retail sales was flat versus the expected .2% increase. This helped keep interest rates down. Last week the jobs report was positive, unemployment was lower than expected and more jobs were added to the economy, which caused interest rates to spike. These are subtle changes that can greatly affect the mortgage industry.
Federal Reserve System:
Janet Yellen, Chair of the Federal Reserve System, plays a large role in the interest rates for the mortgage industry. For a number of years the Federal Government was purchasing large amounts of mortgage backed securities in an effort to keep interest rates low. The Fed monitors the economy and will influence the interest rates to control the economic growth of the US. By decreasing interest rates, the Fed is attempting to spark growth in the economy and encourage borrowing. If the economy is growing, they will use rising rates to control the growth.
Inflation is a prominent economic factor and a key concern for the industry. Inflation increases prices and decreases the spending power in the economy. As inflation rises, interest rates will also rise.
In summary, there are many factors that influence mortgage interest rates. All of these factors are outside of our personal control. When it comes time that you need a loan to purchase or refinance a home, you will be faced with making a decision to lock in your interest rate or let the rate “float” in hopes that the market improves and you can get a lower rate. Here is my advice in regards to that decision: It is much better to be locked in with rates falling than floating with rates rising.
Every borrower has a unique need, as far as their loan is concerned. If you have any questions or would like more information, please contact our preferred Lender, Keith Harris at Intercoastal Mortgage Company.
The JS Realty Team – not only serving Brambleton, serving all of Northern Virginia.