Mortgage interest rates may seem like a small percentage of the total amount needed to finance a house, but it has a significant effect on the overall value of the property. Every mortgage borrower seeks low mortgage rates while mortgage lenders only want to ensure that their investment in lending the money is secured lowering the risk of financial loss. Is it possible for a borrower to get the lowest mortgage rates available? If you have stable finances and a good credit rating and history, then you shouldn’t worry about anything.
Mortgage rates are influenced not only by your financial standing and your credit score, but it is affected by some critical economic factors and even by government fiscal policies. The idea behind the factors that influence mortgage rates all leads to the concept of how balance is kept in the economy – basic rules of supply and demand.
Inflation is one of the key factors that could make mortgage rates go up and down drastically. The gradual upward movement of prices of commodities affects the purchasing power of mortgage borrowers. The risks of lending money to those who may no longer afford to pay the monthly premium also become high for mortgage lenders. Lenders have to maintain their interest rate to the level that is sufficient enough to overcome the inflation of economy, giving people more capacity to pay up their loans monthly.
The steady growth of the economy also plays a huge role in ensuring the security of both mortgage lenders and borrowers. The higher the economic rate means, the higher the income that is produced. Mortgage lenders become more secure that the mortgage borrowers will have more than enough to pay for their monthly premium and live comfortably. The upswing in the demand for mortgage borrowers also put mortgage lenders in a good position. When the demand is high, and they could provide the supply, banks can control the rates as they wish. The opposite is also true when the economy seems to weaken.
Housing market conditions also significantly affect the mortgage rates. When fewer homes are being built or are put on sale, the decline in the home purchases might push mortgage lenders to pull their prices down too. When there is also an increase in the number of consumers looking for houses to buy, the demand goes up and so does the interest rate.
Indeed, the mortgage industry is dependent on a lot of factors, but it does not mean you can’t get through it. All you need is to know when the right time is to apply, and you’ll be good to go.