What's in this article?
As a homebuyer, staying on top of the latest daily mortgage news and the factors that impact it is crucial.
But do you know what to watch out for in the ever-changing mortgage landscape? Better yet, how to secure the best rates for your dream home?
Let’s go over the factors that affect mortgage rates, the difference between fixed and adjustable mortgage rates, and how to keep up with it all in the ever-changing daily mortgage news cycle.
Whether you’re entering the real estate market for the first time or not, this guide will be a valuable resource in helping you navigate the complex world of mortgage rates.
Which factors affect mortgage rates?
To secure the best mortgage rates, you should understand the role of credit scores in determining mortgage rates and the impact of economic factors on rates.
The Federal Reserve
Also known as The Fed, The Federal Reserve arguably plays the most significant role in determining mortgage rates.
The Fed sets the federal funds rate—the interest rate at which lenders (like banks) lend money to each other overnight. While the federal funds rate technically does not directly impact mortgage rates, it absolutely influences them indirectly.
When the Fed hikes the federal funds rate, it almost always leads to higher interest rates across the entire economy, including the rate you get for your mortgage.
Conversely, lower mortgage rates will typically follow suit when the Fed lowers its rate.
Inflation
According to the Brookings Institute, the most significant measure of inflation in the U.S. is the Consumer Price Index (CPI)—a measurement created by the Bureau of Labor Statistics (BLS).
In general, inflation is the rate at which the general level of prices for services and goods rises, and subsequently, the purchasing power of currency falls.
Mortgage lenders closely monitor inflation trends, as higher inflation can erode the value of the money they lend to borrowers. To protect themselves against inflation, lenders may increase mortgage rates to ensure they still earn a profit on the loans they originate.
Economic growth
Economic growth, which is measured by indicators such as the gross domestic product (GDP), can also impact mortgage rates.
A strong, growing economy will frequently lead to increased demand for credit, which can drive up interest rates. Conversely, a weak or stagnant economy might cause interest rates to fall as lenders try to encourage borrowing and stimulate growth.
Your credit score
Your credit score plays a significant role in determining the mortgage rate you qualify for.
Lenders use credit scores to judge creditworthiness and the likelihood of your ability to repay the loan. A higher credit score can result in more favorable mortgage rates, while a lower credit score may equal a higher rate or possibly denial of your mortgage application.
To improve your credit score, focus on the following:
- Ensure you consistently pay all of your bills on time
- Keep your credit card balances low or preferably at zero by the due date
- Avoid applying for new credit unnecessarily
Regularly monitor your credit report to help you identify and dispute any errors that could be negatively impacting your score.
Global events
Global events, such as political developments, economic crises, and natural disasters, can have a significant impact on mortgage rates. These events can influence investor sentiment and cause fluctuations in the global financial markets, which can, in turn, affect mortgage rates.
For example, during times of economic uncertainty, investors may flock to safer investments, such as U.S. Treasury bonds. Increased demand for these bonds can drive down their yields, which can lead to lower mortgage rates.
Government Policies
Government policies, such as tax reforms and fiscal stimulus measures, can also impact mortgage rates. These policies can influence economic growth and inflation, which can, in turn, affect mortgage rates.
For example, a tax reform that stimulates economic growth could lead to higher inflation, which might result in higher mortgage rates.
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Paying attention to mortgage news is essential for both homebuyers and homeowners.
Mortgage rates will fluctuate daily—typically gradually, but not always. Staying informed about the latest trends can help you make better financial decisions.
For example, if you’re in the market for a new home or considering refinancing your current mortgage, being aware of the history and trends of mortgage rates can help you determine the best time to either lock in a rate or keep it adjustable for the immediate future.
While no news source can—or ever should—claim 100% accuracy, a distilled aggregate of mortgage daily news can give you a better chance to see how the markets are fairing and where the interest rates are going.
Online Resources
Several websites and online platforms provide daily updates on mortgage rates and housing market news. Websites like:
These sites, along with many others, offer comprehensive information on current mortgage rates, market trends, and financial news that can impact the housing market.
Newsletters
Sign up for newsletters from mortgage resource websites—like the one you’re reading now—and following them on social media can ensure you stay updated on the latest mortgage news daily.
The biggest advantage of a newsletter is that they are sent to you directly, saving you time from having to search out relevant information from the web.
Financial news outlets
Publications such as CNBC, Bloomberg, and The Wall Street Journal also cover mortgage rates and housing market news. Subscribing to their newsletters or following them on social media can keep you informed about the latest developments in the mortgage industry.
Lenders and brokers
Mortgage lenders and brokers can be valuable resources for staying updated on mortgage rates and market trends. Because it’s a natural part of their business, they often has access to real-time rate information and can provide personalized advice based on your specific situation.
Regularly checking in with your lender or broker can help you stay on top of the latest mortgage rates and market news, especially if you’re hoping to buy or refinance in the near future.
What can you do to secure the best mortgage rate?
You obviously can’t control global events, policies, or other external factors on your mortgage rate. Keeping up with mortgage news can give you insight into the best time to buy.
But there are some individual actions you can take as a home buyer or owner looking to refinance, to help you get the best rate, no matter what the market is doing.
Save for a significant down payment
More money down can help you secure a better mortgage rate, as it reduces the loan-to-value (LTV) ratio—the percentage of the loan amount compared to the value of the property.
A lower LTV ratio is seen as less risky by lenders, which can result in more favorable mortgage rates. If you’re able to put down at least 20% of the home’s purchase price, private mortgage insurance (PMI) will likely be eliminated, thus lowering your monthly mortgage payment.
Shop around for the best rates
Mortgage rates can vary significantly between lenders, so it’s essential to shop around and compare offers before committing to a loan. You can start by researching rates online and contacting multiple lenders for quotes.
Be sure to compare not just the interest rate but also points, fees, and other costs associated with the mortgage.
Clean up your credit report
As we mentioned above, a higher credit score will likely get you a better mortgage rate. Other than consistently making payments on time, try to clean up any outstanding debt that you can manage to pay off. If you’re a first-time home buyer, this is a great step to prepare for homeownership.
Homefinity is here for you
Mortgage rates and what’s happening daily in the mortgage market are important factors to consider when buying or refinancing a home.
Staying informed on economic factors, government policies, and global events can help you anticipate future trends in mortgage rates and the housing market, and help you determine the best time to buy.
At Homefinity, we understand the complexity of the mortgage process and are committed to helping you navigate it with ease. Our loan officers are available to answer any questions you might have and provide personalized advice based on your specific situation.
