Mortgage rates are affected by numerous factors. Many other influences can also trigger rates to rise and fall.
What Moves Mortgage Rates
Four macro forces shape where rates land on any given day. A skilled loan officer watches all four simultaneously.
Inflation
Mortgage lenders are very sensitive to inflation. When inflation rates go higher, interest rates often rise as well — lenders need to maintain real returns above the rate of inflation.
Economy
When GDP and employment rise, it's a sign of a growing economy, meaning greater demand for real estate. When demand rises, so do interest rates — there is more demand than money to lend.
Federal Reserve
While the Fed doesn't directly set mortgage rates, when the federal funds rate is raised or lowered it affects many markets — including the bond market — that can ultimately push mortgage rates up or down.
Investors
Bonds are typically a safe investment. When the economic outlook is poor, investors flood to the bond market. More investors in bonds drives bond yields up — and mortgage rates tend to follow.
Why Rates Rise & Fall
Knowing the signals that push rates in either direction helps you act at the right moment.
Why Interest Rates Rise
- Investors dump more money into stocks than bonds
- A high number of bonds are auctioned, lowering bond prices and raising interest rates
- Wages and employment are up — consumer spending rises, affecting GDP and the economy
- The stock market moves higher, causing bond prices to drop and driving rates higher
Why Interest Rates Fall
- Expectation that the Fed will continue to keep short-term rates low
- A slow housing market and lower demand for mortgages
- Declining economy — lower employment levels and lower wages
- The stock market moves to very low levels, driving bond prices higher and rates lower
The Bottom Line
No single factor controls mortgage rates — it's the interplay between inflation, economic growth, Fed policy, and investor behavior that determines where rates land. The best time to lock a rate is when multiple signals align in your favor. A Tovara advisor monitors these signals daily and will tell you exactly when to move.
Information contained is intended for general informational purposes only and, while every effort has been made to ensure accuracy, no guarantee is expressed or implied. Talk to your loan officer for the most current rates and market trends.