Uncontrollable Factors that Influence Mortgage Interest Rates

Finding and securing the best mortgage rate can be a confusing process if you’re not sure what you’re looking for. Often times, larger lenders advertise the interest rate that is the best case scenario. But interest rates aren’t one size fits all. Learn more about which uncontrollable factors can influence interest rates.

Supply and Demand

Interest rate levels are determined based on the demand for credit. When there is an increase in demand for money or credit, interest rates will rise. When there is less of a demand for money or credit, interest rates will lower. On the other hand, if the supply of money banks have access to through checking and savings accounts decreases, rates will go up. If banks have an increased supply of money, rates will go down.

Inflation

Inflation occurs when the prices of goods and services rise. Inflation can be a good thing for some homebuyers with debt since it lowers the value of each dollar you owe. However, many lenders will raise the interest rate in order to account for a difference to due inflation.

Federal Funds Rate

Another factor that influences mortgage interest rates is the federal funds rate. It’s the interest rate that banks charge one another for short-term loans and is determined by the U.S. Federal Reserve. It is used to help balance the economy. If the economy is slow, the Federal Reserve lowers rates to boost borrowing. When the economy is growing quickly, the Federal Reserve will increase rates to deter borrowing.  

To learn more about current mortgage interest rates, contact a First Ohio Home Finance loan officer. We’ll help you every step of the way. Give us a call at (888) 818-1850 or fill out a form online.

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