Know About The Factors Affecting Mortgage Interest Rates Predictions

The interest rates charged on home loans usually fluctuate from time to time due to a variety of factors. If you’re planning to buy a house, you may want to know these factors to ensure you apply for the mortgage at the right time. Similarly, if you’re thinking of taking an adjustable-rate mortgage, you may want to get a prediction on how interest rates will move in the next foreseeable future. If there is a chance that rates will be hiked, a fixed rate mortgage should be considered instead. Lowest Home Loan Rates can help you to hit your goal as a prospective homeowner. 

Factors Affecting Mortgage Interest Predictions

i) Historical Trends

The recent and current states of the economy can tell you where interest rates will be moving towards. If the economy has been booming for more than a decade, then the next phase may be a recession. Many factors can trigger an economic recession, and interest rates are likely to change during the recession. Economists and financial experts can look at past, recent and current trends to determine whether or not the economy is heading into a recession, in which case, interest rates will go through the roof. 

ii) Current Market Rates

It is possible for experts to look at the current market rates and predict interest rate movements in the near future. If interest rates are at a record high or record low, chances are that movements will start occurring in the opposite direction. This is because low interest rates usually spur inflation, which can easily be controlled by raising interest rates. Similarly, deflation can be contained by lowering interest rates to stimulate borrowing by consumers and increase the supply of cash in the economy. 

iii) Geopolitical Concerns

No economy is independent of another, so a political crisis or war in one country can affect the economy in another country. The Russian invasion of Ukraine, for instance, has already affected the global economy because Russia is a major exporter of crude oil and natural gas as well as agricultural products, such as fertilizers and wheat. This means that global prices of these products have risen. The increase in the cost of these goods will most likely affect inflation in the country. As a result, interest rates must be adjusted to take into consideration the increase in the cost of living due to geopolitical issues. Similarly, geopolitical issues can affect major markets for products produced in the country, which means that the local economy will be adversely affected. The government must take measures to cushion the local economy as a result. 

iv) Change in Political Leadership

Some leaders are known for fiscal responsibility while others just want to grow the economy regardless of the cost. If there is a change of leadership in the country, and a new kind of leadership is expected to take over, the market will respond accordingly to the change in leadership. For instance, lenders may start restricting their loan products if leaders who are seen to be conservative are voted into office and vice versa. 

v) Inflation

Interest rates are usually adjusted to contain inflation and deflation. If there is high inflation in the economy, the government will most likely raise interest rates to attract public money by making treasuries more attractive than other investments. Similarly, the high interest will convince the public to invest through fixed deposit accounts to get high returns. The high interest will also discourage borrowing because nobody wants to pay a high interest rate. The net effect is reduced supply of money, which will reduce inflation. 

vi) Current Mortgage Default Rate

The mortgage lending industry is a key indicator of how the economy is performing. If more people start defaulting on their mortgages, lenders may hesitate to issue new mortgages. As a result, interest rates may be risen by lenders to account for the increased risk of lending. By looking at the current mortgage default rate in the market, it is possible for experts to predict the future movements of mortgage interest rates. 

While it is possible for the average person to look at all these factors and use the information, they obtain to make an informed decision, the job is best left to industry experts. Therefore, you can decide to consult a financial expert or follow business news to get insights about the market from experts. Once you have the required information, you can decide to either take a mortgage immediately or postpone the decision. 

If you were thinking of refinancing your home loan, you can decide to wait a little bit longer if interest rates are expected to reduce in the near future. If you have an adjustable-rate mortgage, but you want to convert it to a fixed rate mortgage because interest rates are expected to rise considerably in the near future due to an expected period of recession, you should do it immediately. There are many lenders who are willing to help you refinance your mortgage, so the only thing you need to do is carry out a little bit of research before you decide to make your final decision.

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