ReSET Blog
Blog · October 26, 2022 · AUTHOR: Stanley Bawalan

What Can Cause Mortgage Rates to Fluctuate?

Mortgage rates are constantly fluctuating. This is because there are a lot of different factors that can affect the interest rate you pay on your mortgage loan. The most important factors are related to the economy and your personal finances, so it's important to understand what they are and how they affect you.

The economy and the fed

The economy and the Federal Reserve are two factors that influence interest rates for mortgages. The Fed raises or lowers interest rates in order to control inflation, which is generally considered a measure of how fast prices increase. When it lowers them, mortgage rates fall; when it raises them, they go up.

The other factor that affects mortgage rates is the state of our country's economy as a whole. If there's an economic downturn, that can mean fewer people buying houses, which leads to more inventory on the market and therefore lower home values overall (and thus higher monthly payments). This could trigger another round of mortgage rate increases if lenders want to strengthen their financial standing by earning more money through their investments.

Political uncertainty

There are a number of factors that determine mortgage rates, and political uncertainty is one. When the economy is unpredictable, investors become more wary about investing in it. This causes interest rates to increase as investors seek out more stable investments. Investors may also be less willing to take risks on new projects if they believe that changes in legislation could cause prices to drop or profits to disappear altogether.

The stock market

The stock market is a major factor in determining mortgage rates. Mortgage rates are affected by the economy, and when the economy is strong, interest rates tend to be lower. This is because there is more demand for loans, which means that lenders can charge less for them.

When it comes to mortgages, the Federal Reserve is one of the biggest influencers on interest rates. The Fed sets its benchmark rate based on economic conditions and other factors. When the Fed raises this rate — as it did in December 2018 — it increases borrowing costs for everyone from individual homeowners to big companies with large amounts of debt.

The relationship between interest rates and stocks isn't always clear cut, however, the stock market has historically been a leading indicator of economic growth, but sometimes it leads by years — meaning that while stocks are going up, there may not be any improvement in employment or wage growth yet.

Consumer demand for mortgages

When mortgage rates are low, consumers are more likely to buy a house. The lower the interest rate, the more money you have to put toward your mortgage payment each month. As a result, you'll be able to afford a larger home or one that's in an area where you want to live. Plus, when mortgage rates are low compared to other types of loans for personal finance and investment needs (like credit cards), it makes sense for people who don't have enough savings on hand to use borrowed funds from banks instead of paying interest on their everyday purchases.

However, when mortgage rates increase—even just by 1 percent—it can have an adverse effect on consumer demand for houses because fewer people are able to qualify for mortgages due to the higher monthly payments required under these conditions.

When you should lock in your rate.

When to lock in your rate:

  • When you’re ready to buy. If you’re not quite sure if now is the right time for you to purchase a home, it might make sense to wait until rates rise or fall further before locking in a mortgage rate. If rates are going up, wait so that you can tap into the lower rates by locking in your mortgage at that time. Similarly, if they’re falling, wait until they hit bottom before locking in because they may go even lower than expected.

  • When interest rates are high relative to historical averages and have been rising rapidly over the past few years (or months). This means that homeowners will be paying more on their monthly payments than they have historically—and therefore should lock in their rates as soon as possible so that they don't end up paying more than necessary on their monthly payments during this time period when interest rates are high.


So what is the takeaway here? If you are looking to buy a house you should lock in your rate as soon as possible. Rates can fluctuate on a daily basis, so it's important that you get them locked in before closing. Some lenders will even allow you to lock in after your offer has been accepted by using their online portal for locking in rates (this allows for more flexibility).

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