Four Important Dynamics Affecting Mortgage Rates, San Diego

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November 26, 2021
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Four Important Dynamics Affecting Mortgage Rates, San Diego

Several factors affect mortgage rates, San Diego. However, the industry considers these four as the most important among them. These variables are the “movers” of the “mortgage rate universe.” The dynamics they bring into the market create a significant impact on mortgage applications and, thus, it makes sense to keep an eye on them.


Why does inflation affect mortgage rates? Because it devalues our money. When the inflation rate is significantly higher than the previous one, expect it to diminish your purchasing power. Inflation devalues everything denominated in U.S. dollars, which includes mortgage-backed bonds. When the inflation rate is substantially higher than estimates, the demand for MBS starts to fall.


Economic growth is also a crucial indicator affecting mortgage rates. Keep an eye on items like gross domestic product (GDP), employment rate. When the economy is doing well (as indicated in GDP), expect higher wages and, therefore, consumer spending, including consumers looking for mortgage loans for home purchases. Indeed, the law of supply and demand comes into play. The upswing in mortgage applications tends to push mortgage rates higher in San Diego.


The overall condition of the larger bond market indirectly affects how mortgage companies charge for mortgages. One commonly used government-bond benchmark – to which mortgage lenders often set their interest rates – is the 10-year Treasury bond yields. Usually, mortgage-backed securities sellers must offer higher. That is because repayment is not 100% guaranteed as with government bonds. (your mortgage broker should be able to explain more about this one.)


The monetary policy by the Federal Reserve Bank is another important factor that can influence both the economy in general and interest rates, which includes mortgage rates. The Federal Reserve does not set the specific interest rates in the mortgage market. However, when they establish the Fed Funds rate, they create a significant impact on interest rates. In general, when we see an increase in the money supply, mortgage rates tend to go down. On the other side of the coin, when they are tightening the money supply, it pushes rates upward.

Online looking for a trusted mortgage company to help you find the best deals on mortgage rates, San Diego? Contact HomePlus today at (800) 958-7587.