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If you’re searching for a home mortgage in Yardley, you may ask dozens of questions. Which real estate agent should I choose? How much home can I afford? And, what should I know about interest rates?
Do you really understand interest rates? Why do they change so often? Here are 5 factors that affect mortgage interest rates.
1: The Economy. Hot economies drive up demand, since more people have jobs and money to spend. An increased number of people getting mortgages can drive up interest rates. On the other hand, a recession where unemployment is high can decrease the demand for mortgages, driving the interest rates down lower.
2: The Bond Market. If bonds are increasing, mortgage interest rates are usually decreasing. They are indirectly proportional to each other. If bonds are decreasing, you can expect interest rates to rise.
3: Housing Market Conditions. For example, living in Yardley PA where the real estate market is booming can cause demand to increase, and interest rates will rise along with it. In a place where the housing market is cold, mortgage interest rates will be a bit lower.
4: Credit Score. High credit scores are awarded lower interest rates, while consumers with lower credit scores will be “dinged” with a higher interest rate on their mortgage loan.
5: Type of Interest Rate. Choosing an adjustable rate mortgage might set you up for a lower interest rate in the short term. A fixed rate may be a bit higher, but is locked in and can’t be raised.
It’s important to understand interest rates and that they are not all the same. By understanding what makes them move, you can choose the best time to purchase a home.