When you are ready to buy a house or refinance your existing home loan, getting the best mortgage interest rate is key to minimizing your total borrowing costs. You may have heard in the news lately about rates moving up and down due to inflation trends.
What Affects Mortgage Rates?
- Economic Conditions – The general trend is that when the economy is doing well (gross domestic product growth, stable inflation, low unemployment rates, etc.), there is a larger demand for home loans which pushes mortgage interest rates higher. Conversely, when the economy is doing poorly mortgage rates tend to fall.
- Central Bank Policies - The Federal Reserve is responsible for managing the nation’s inflation levels. It will raise its influential federal funds rate when inflation gets too high and lower it when it wants to stimulate economic growth. That rate affects mortgage rates as well as everything from credit card to auto loan rates.
- Investor Sentiment - Mortgage rates are most closely tied to the U.S. bond market and the movement of Treasuries. If investors feel uncertain about the economy, they often put more money in the safety of Treasury bonds, pushing those interest rates up and mortgage rates down.
How Often Do Rates Change?
So how often do all these factors cause mortgage rates to change? Lenders will closely monitor the market rates, and can actually update their interest rates multiple times a day. However, they are not likely to significantly rise or fall in the course of one day. Major changes tend to happen more gradually over weeks and months.
What is a Rate Lock and How Can It Help?
The rapid pace of change may be intimidating, but most lenders offer borrowers the option to lock in their interest rate for 30-60 days. So, if you feel rates are generally on the rise, you may want to lock in your rate soon after starting the mortgage approval process.
Mortgage interest rates change frequently, even multiple times a day but you can get some peace of mind by locking in your rate when you feel rates are at a low level.
Give us a call today if you're thinking of buying or refinancing your home.