The interest rate your lender advances you is the most crucial element you need to consider when shopping for a mortgage. Different elements influence the rate you’ll get. While you can work towards improving some of them, such as your credit score and debt ratio, to make you an attractive borrower, there are some beyond you.
These are the market factors that influence the best mortgage rate a Salt Lake City lender like Altius Mortgage Group can advance. Lenders consider these factors to ensure they effectively manage their risk through their charged interest rates.
Mortgage lenders pay close attention to the gradual increase in prices secondary to inflation. This is because the inflation gradually erodes the dollars’ purchasing power. So, lenders should maintain a sufficient interest rate to overcome the purchasing power’s erosion and ensure their rates ultimately represent a net profit return for them.
Federal Reserve Monetary Guidelines
The Federal Reserve Bank’s monetary policy doesn’t determine the prevailing rates in the mortgage sector. The bank’s actions in setting a Feds Fund rate and adjustment of the money supply, however, have a considerable effect on the rates offered to the public. An increase in the money supply will reduce the prevailing mortgage interest rates while a decrease will increase the rates.
Housing Market Trends
Current trends and conditions in the housing sector also influence mortgage rates. If there are few homes available for sale, this leads to a reduced mortgage demand and hence an increased interest rate. The rate will also increase if there’s a decreased consumer demand for mortgages even with enough houses for sale.
Getting a good mortgage rate requires tact and research. Before heading out to apply for a home loan, understand these factors first. This will help you objectively analyze the rates lenders will give you.