The Impact of Mortgage Rates: A look at the Current Market

Mortgage rates are a major factor that homebuyers consider when shopping for a mortgage. If you're in the market for a new home or thinking about refinancing your current mortgage, you're probably wondering about current mortgage rates and how they might impact your monthly payments. Here's a look at the current state of mortgage rates and what you can expect when it comes to securing a mortgage. 

The mortgage rates have steadily increased throughout the year and are now at 6.5% as of January 2023. But let's take a look back at how we got here. One year ago, January 2022- the average rate for a 30 year fixed rate mortgage was 3.5%. Mortgage rates steadily increased throughout 2022. 

But what drives mortgage rates? They are influenced by a variety of factors, including the state of the economy, inflation, and Federal Reserve monetary policy. When the economy is strong and growing, mortgage rates tend to be higher, as investors demand higher returns on their investments. Conversely, when the economy is struggling, mortgage rates tend to be lower, as investors are less willing to take on risk. Inflation is another factor that can impact mortgage rates. When inflation is high, mortgage rates tend to rise, as lenders compensate for the erosion of their money's purchasing power. Finally, Federal Reserve monetary policy can also influence mortgage rates. The Federal Reserve sets a target for the federal funds rate, which is interest rate at which banks lend money to each other overnight. When the federal funds rate is low, mortgage rates tend to follow suit, as lenders can borrow money at a low cost and pass those savings on to borrowers. conversely, when the federal funds rate is high, mortgage rates tend to rise, as lenders pay more to borrow money and pass those on to borrowers. 

So what does all this mean for you as a potential homebuyer or refinancer? It's important to keep in mind that mortgage rates can fluctuate, so it's always a good idea to keep an eye on them and to shop around to find the beat deal. and although mortgage rates are higher than they were one year ago, consider that you will have far less competition from other buyers- meaning you may be able to negotiate a  better deal for your home purchase. Getting a better price on your new home generally balances out the higher interest rate on your loan. Ever heard the saying " Date the rate, marry the house?" This is a very relevant phrase right now with rising rates. Just remember that you can always refinance your mortgage later if/when rates go down.