Many people are asking, will rates go down? This is a great question. Mortgage rates, the interest rates at which borrowers can secure a mortgage loan, are constantly changing and can have a significant impact on the housing market. Another question people have is "How does inflation affect mortgage rates?" One of the main factors that determines mortgage rates is inflation. Inflation is the rate at which the general level of prices for goods and services is rising and subsequently purchasing power is falling.
When inflation is high, the cost of goods and services is also high, which means that lenders need to charge higher interest rates to make up for the loss of purchasing power. This is because as inflation rises, the value of money decreases, so lenders must charge higher interest rates to make up for the loss of value.
On the other hand, when inflation is low, the cost of goods and services is also low, which means that lenders can charge lower interest rates. This is because as inflation falls, the value of money increases, so lenders can charge lower interest rates without losing money.
It is important to note that inflation and mortgage rates are not directly tied, but they do have a correlation. The Federal Reserve, which sets the federal funds rate, also has a significant impact on mortgage rates. When the Federal Reserve raises the federal funds rate, mortgage rates also tend to rise. On the other hand, when the Federal Reserve lowers the federal funds rate, mortgage rates tend to fall.
In conclusion, mortgage rates change due to a variety of factors, but inflation and the Federal Reserve's monetary policy are two of the most significant. When inflation is high, mortgage rates tend to be high, and when inflation is low, mortgage rates tend to be low. It is important for borrowers to keep an eye on inflation and Federal Reserve's monetary policy, as it can have a significant impact on their mortgage rate. To get more informaiton, contact Orange County Mortgage Broker, Nathan Kowarsky at Clear Mortgage Capital for a quote. With over 15 years of experience in the business, Nathan and his team are able to provide advice and offer guidance throughout the home purchase and refinance process.