Rates & The Economy

Inflation is a key economic factor that affects mortgage rates. When the rate of inflation rises, the cost of borrowing also tends to rise, which can cause mortgage rates to increase.

Unemployment is another important economic factor that affects mortgage rates. High unemployment rates can indicate a weaker economy, which can lead to lower mortgage rates. Conversely, low unemployment rates can indicate a stronger economy, which can lead to higher mortgage rates.

The Federal Reserve’s monetary policy, which includes decisions about interest rates, has a significant impact on mortgage rates. When the Federal Reserve raises interest rates, mortgage rates tend to rise, and when the Federal Reserve lowers interest rates, mortgage rates tend to fall.

GDP is a measure of a country’s economic output, and it can also impact mortgage rates. Strong economic growth, as indicated by a high GDP, can lead to higher mortgage rates, while weak economic growth can lead to lower mortgage rates.

Mortgage rates are closely tied to bond yields, as bonds are often used as a benchmark for setting mortgage rates. When bond yields rise, mortgage rates tend to rise, and when bond yields fall, mortgage rates tend to fall.