How often do mortgage rates change?
Quick insights
- Mortgage rates can fluctuate daily, and sometimes even multiple times within the same day.
- Rate changes are influenced by a wide range of economic factors, such as inflation trends, Federal Reserve decisions and market demand for mortgage-backed securities.
- Because mortgage rates typically shift frequently, locking in an interest rate at the right time could possibly save you thousands of dollars over the life of the loan.
Mortgage rates can change daily or even several times within the day depending on the market. Loan providers typically adjust their rates in response to macroeconomic signals like inflation reports, the yield on 10-year treasury bonds, and actions from the Federal Reserve (The Fed). These changes can be subtle or more noticeable depending on how the market is reacting.
Staying informed about financial markets, trends, and rate movements can help borrowers make better decisions when it’s time to lock in a rate. For homebuyers, being aware of mortgage rates could give you a valuable edge when you’re ready to purchase a home.
How often should you compare mortgage rates?
It’s a good idea to check mortgage rates regularly, especially if you’re actively shopping for a home or preparing to get mortgage preapproval. Rates may vary between loan providers, so comparing options weekly or even more often can be a good financial strategy. Keeping a close eye can prepare you to act quickly when a favorable rate appears.
Factors that influence mortgage rates
Mortgage rates may shift because of various economic, financial and market-driven factors. While no single element determines the interest rates, the following factors often play a major role:
- Federal Reserve monetary policy: The Fed doesn’t directly set mortgage rates, but its decisions on the federal funds rate can strongly influence borrowing costs. When the Fed tightens or eases monetary policy, mortgage rates tend to respond accordingly.
- Inflation: Higher inflation often reduces the purchasing power of money over time, prompting mortgage providers to raise interest rates to maintain returns. On the other hand, if inflation slows down, interest rates might stabilize or decrease.
- Employment data: Strong job growth and low unemployment figures can signal a growing economy, which could lead interest rates to increase. Weaker employment reports might have the opposite effect.
- Gross Domestic Product (GDP): GDP growth reflects overall economic health. Mortgage rates typically rise to keep pace with increased demand from homebuyers. Slower economic growth at the national level may make interest rates decline.
- Housing market conditions: Various factors can affect how mortgage providers price their loan products, such as homebuyer demand and available inventory.
- Bond market performance: Mortgage rates are closely tied to yields on treasury bonds (U.S. treasury notes). When bond yields rise, mortgage rates tend to follow suit, and vice versa.
How to lock in your mortgage rate
Once you’ve found an interest rate that fits your budget and financial goals, you may want to consider locking it in to help avoid potential increases during your mortgage approval process. A rate lock secures your mortgage rate for a specific period, usually 30, 45 or 60 days, while your loan is being processed.
Mortgage providers often charge a fee to lock in an interest rate, which is typically embedded into the interest rate or loan fees rather than being a separate line-item charge. Some lenders may offer extensions or a float-down option, which could allow you to take advantage of a lower rate if one becomes available during your lock period.
When to lock in a mortgage rate
Mortgage rate movements follow certain patterns and long-term trends that you may want to monitor closely to guide your timing when deciding to lock in your interest rate:
- Seasonal slowdowns: Mortgage rates may trend slightly lower during the winter months when homebuying activity usually cools down. This could potentially give homebuyers an edge during off-peak seasons.
- Long-term economic shifts: From the sky-high rates of the 1980s to the historically low rates of the 2010s and 2020s, mortgage rate trends generally reflect bigger economic movements and global financial cycles.
- Faster fluctuations through tech: Digital lending platforms and algorithm-driven pricing tools have made it simpler for loan providers to adjust rates more frequently, making real-time awareness more important than ever.
How to get a lower mortgage rate
While external economic factors are important, there are personal factors that may qualify you for a lower mortgage interest rate:
- Improving your credit score: A higher credit score often leads to better rate offers and loan terms. Before applying for a mortgage, pay your bills on time, reduce your debt and avoid new credit inquiries.
- Making a larger down payment: Putting more money down reduces your loan-to-value (LTV) ratio. This could help you secure more favorable pricing and terms from mortgage providers.
- Choosing a shorter loan term: Shorter terms, such as a 15-year mortgage, typically come with lower interest rates compared to a 30-year mortgage. Keep in mind that the monthly mortgage payments will be higher.
- Buying points: Paying for mortgage points (or discount points) upfront can reduce your interest rate over the life of the loan. Talk to a Home Lending Advisor to see if this strategy fits your budget and timeline.
- Shopping around: Rates and fees can vary by mortgage lender. Comparing multiple offers on any given day may help you find the rate you’re looking for.
- Working with a professional: A knowledgeable Home Lending Advisor can help you explore different programs, discuss mortgage discount points or go over loan types that suit your unique financial situation and unlock a better interest rate.
Questions to ask when comparing mortgage rates
When you’re shopping for a mortgage, it’s not just about finding the lowest interest rate; it’s about understanding the full financial picture. Consider asking a professional these important questions to ensure you’re comparing offers accurately:
What is the annual percentage rate (APR)?
The APR includes both the interest rate and lender fees, giving you a clearer sense of the true cost of the mortgage loan.
Are there any discount points or lender credits included in this rate?
Some mortgage lenders may offer a lower interest rate in exchange for upfront costs, or a higher rate with lender credits. It's vital to understand the tradeoff.
How long is the rate lock, and are there any associated fees?
Find out how long your quoted interest rate is valid and if there are costs to lock it in or options to use a float-down option if mortgage rates drop.
What are the estimated closing costs, and how are they broken down?
Knowing the full breakdown of closing costs and fees, like appraisals, underwriting and title charges, can help you spot any unexpected charges.
Is this rate for a fixed or adjustable-rate mortgage (ARM)?
Make sure you understand whether the interest rate will remain the same for the life of the loan or change after an initial period.
Are there any prepayment penalties or restrictions?
Some loans may include fees for paying off your mortgage early. If you plan to refinance or sell in the near future, you need clarification from the mortgage company.
In summary
Mortgage rates may shift frequently due to economic trends, market activity, the Federal Reserve and lender-specific factors. Carefully comparing offers, strategically timing your rate lock and closely working with a Home Lending Advisor can help you make a more confident homebuying decision.
