Mortgage interest rates are influenced by a wide variety of factors. One of the most important factors to influence mortgage interest rates is inflation. As a general rule, the lower the inflation affecting the nation’s economy, the lower mortgage interest rates will be.
Common Influence of Interest Rate Quotes
In other words, higher inflation generally equals higher interest rates, but while inflation is an important factor in determining national mortgage rates, it is not the sole determinant.
Other factors which influence mortgage interest rates include supply and demand, the bond market, the nation’s overall economic health, including the political and economic stability in the country, and prevailing currency exchange rates. For example, during periods of high economic and political uncertainty mortgage interest rates may increase.
However, because the government, and quasi-governmental institutions such as the Federal Reserve, helps to set national economic policy, interest rates can be artificially pushed down as a result of governmental action in many cases.
Individual Interest Rates
The interest rate an individual borrower will be charged on his or her mortgage loan depends primarily on the following factors:
- The borrower’s credit history and credit score
- The percentage of the down payment towards a home purchase or the amount of equity in the home in the case of a refinance
- The loan program (Conventional, VA, FHA, etc.)
- The overall loan amount
Borrowers with good credit who are applying for a conventional loan and are making a substantial down payment (or who have significant equity in their homes) usually obtain the most favorable interest rates on their mortgage loans, comparatively speaking.
Every borrower’s financial situation is unique so it is difficult to predict what your loan situation will look like without discussing it with a professional lender. If you’re ready to get the process started, reach out to Matt Chao at 619-577-4030 today!