Exploring The Top Factors That Affect Mortgage Rates

If you are planning to buy a home on a mortgage loan, it is a must for you to know when the interest rates for mortgage loans come down. This is because getting your loan at the right time can enable you to make you considerable savings on interest. There are many different factors that affect mortgage rates and when you know about them you have the ability to time your investment correctly. The following are some of the most common factors that help mortgage rates to fluctuate:

  • Credit history of the applicant of a home loan
  • Economic situation of the country
  • Peoples expectations on the economy
  • Inflation
  • Monitory policy of the government

Credit history of the applicant

When a person goes to a financial institution asking for a home loan, the particular financial institution will always look at the credit history of the applicant in order to make sure that he will not default on paying back the loan. In case he has previous occasions where he has delayed repayments of loans or other such blemishes, the lender will increase the rates to compensate for the risk he is going to run. Making too many applications for credit facilities and having unpaid loans are considered decisive factors that could affect the interest rates offered to a particular applicant of a mortgage loan.

Economic situation of the country

Economic situation prevailing in the country is also considered a factor that can affect mortgage rates. When the economy is in a vibrant mood, everyone will have money and the demand for properties will go up. There will be more buyers and the lenders also will have a good demand for their money. Naturally, the mortgage rates will go up as a result. The opposite is the result when a country’s economy slows down. The same way people think of their long term financial prospects when the economy of the country is growing when economy slows down people will doubt on their ability to sustain their statuses leave alone buying property. Even these sentiments cause mortgage rates to go up and come down at noticeable levels.


Mortgage rates will go up and down depending on not only the economic situation of the country but also the expectations people have on the economy. When anyone is contemplating on buying a home with a mortgage loan, he will not hesitate to do so in case he perceives that the economy of the country is going to improve in the future. The demand for home loans will go up in such situations and so will be the interest rates. There will be more money invested in the industry and not only the homes will be in demand but also the derivatives connected to the industry such as furniture will also have a better demand. Quite the opposite will happen in case people foresee a gloomy economic picture for their country. The end result is the lower mortgage rates.


Inflation is another decisive factor that affects interest rates on mortgage loans. When people experience better economic activity in a country, everyone will think of making money as opportunities become abundant. The result is the increased demand for money and the interest rates invariably will increase. When people start expecting an increase in the economic activity in future, there is always an increase in the interest rate. When the interest rates go up, lenders for mortgage loans also will be compelled to jack up their mortgage rates to keep their margins. When the inflation comes down, the mortgage rates will also come down as interest rates invariably will come down.

Monitory policy of the government

No government is able to afford to let its economy taking its own course. Therefore, when the economy slows down the Federal Reserve will take action to balance the various aspects of the economy in order to keep the economy going at a healthy pace. In case of an increase in inflation, people will find it more expensive to invest money and also the buying power of people will get affected. When the inflation is on a downward trend, the prices will come down and people will find it difficult to do business. In order to avoid the effects of these extreme situations, the Federal Reserve will take appropriate measures. These measures also affect mortgage rates.

In case you are aware of these factors that affect mortgage rates, you can be on the lookout and judge for yourself the way interest rates are going to move. If you do that in an efficient manner, you will know when to obtain a mortgage loan and make your investment on your new home. Doing so will not only save you money but also will enable you to weather any difficult times you may be compelled to face in the future.

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