When it comes to buying a home, few words are mentioned more than “mortgage rates”. A budgetary concern for every homeowner, the mortgage rate is often a key factor in whether or not a homebuyer can afford to move forward with a purpose. As industry professionals, we keep a close eye on the changing market, always ready to help homebuyers navigate the mortgage rate question with as little stress as possible.
Every buyer is different, receiving a different mortgage rate, which is determined by a variety of factors, from the buyer’s location and credit score to the current economic and market conditions, which are, in turn, influenced by world events like elections and policy shifts. In light of this ebb and flow, we offer guidance on navigating mortgage rates in an ever-changing market.
What’s Happening with Rates
Perhaps one of the biggest questions most homebuyers have is, “What’s happening with rates?” As of the publishing date of this post, mortgage rates have fluctuated due to various economic factors. According to a November report from Freddie Mac, “rates have leveled off,” with affordability still at the forefront of buyers’ minds.
Rates are influenced by inflation, Federal Reserve policies, and global events. A Mortgage News Daily analysis in November showed that 30-year mortgages remain steadily above 7%, and that change, though negligible, has only happened recently based on the bond market. Though little remains predictable with mortgage rates, they remain fairly steady for now.
What Affects Mortgage Rates
As mentioned above, rates are primarily influenced by inflation, the federal funds rate, economic outlook, and sometimes geopolitical events. For example, high inflation generally pushes rates higher, while economic uncertainty can lead to lower rates.
Though it may seem counter-intuitive, economic growth—and, therefore, higher wages—often drive mortgage rates up. “When the economy starts to slow down,” says Investopedia, “…employment and wages decline, leading to decreased demand for home loans, which puts downward pressure on the interest rates offered.”
What’s more, in addition to economic growth, the bank offering the loan, the bond market, policy, and other factors, the housing market itself can influence mortgage rates. When fewer homes are built, and there’s a lower demand for mortgages, rates tend to be pushed downward.
Practical Steps for Buyers
When it comes to actually buying a home, there are some practical applications for understanding where mortgage rates currently stand and what affects them. Specifically, homebuyers should time their rate. Keep an eye on trends and lock in a rate when the market seems more stable or is slightly decreasing.
Additionally, you should shop around a bit. Take a look at what each lender is offering, not only for rates but fees and terms. Even the smallest difference between mortgage rate offers can make a huge difference in the affordability of a home.
Most importantly, homebuyers should invest in their financial health. Improve your credit score, set aside as much as you can in savings, plan ahead, and use online tools to track rate changes. Using a mortgage calculator or checking in on the daily index will help keep you well-informed.
The overall takeaway is that mortgage rates change—sometimes only a little, and sometimes a lot. However, as a homebuyer, you can understand the market, plan, and budget to help make your home-ownership dreams come to fruition.
*Blog submitted from Jeremy Ganse, Realtor
Jeremy Ganse, Realtor
RE/MAX SmartHub Realty
930 Red Rose Court
Lancaster, PA 17601
717-208-4240 (Cell)
717-208-4444 (Office)
877-271-5520 (Toll free)
