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What Causes Home Mortgage Interest Rates To Fluctuate?

By Bob Redtree

What Causes Home Mortgage Interest Rates To Fluctuate? Read here to understand what factors can impact mortgage interest rates and cause a fluctuation.

When purchasing a home, one of the most important aspects is getting a good interest rate. An interest rate can have as much of an impact on home affordability as the purchase price does. While interest rates have seemed to be somewhat stable the last couple years, there are various factors that have caused them to fluctuate in the past.

Government Intervention

The first factor that can cause home mortgage interest rates to fluctuate is government intervention. To help rebuild the housing market, the government has taken steps to ensure that more people will be interested in buying a home. One of these steps has been investing heavily in mortgage companies to keep interest rates down. If the government decides to stop investing in these companies, rates would increase dramatically.

State of the Economy
The second factor that can cause home mortgage interest rates to fluctuate is the state of the economy. Mortgages interest rates are indirectly affected by governmental interest rates. When the economy is good, the government has to raise rates to stop inflation. When it is bad, the government decreases rates to encourage borrowing and buying. Both of these acts will have an effect on how home mortgage interest rates will fluctuate.

Demand for Mortgages

The third factor that can cause home mortgage interest rates to fluctuate is demand for mortgages. Like anything else in a free economy, the price of a mortgage is effected by supply and demand. As demand for mortgage increases, the average interest rate will increase. If demand lowers or there is suddenly a larger supply of mortgage companies, the average interest rates on for a new mortgage will decrease.

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1. What Causes Mortgage Rates To Fluctuate?
2. How High Will Mortgage Rates Go In 2011?
3. Will Mortgage Rates Drop Again?
4. What Causes Mortgage Interest Rates To Go Up And Down So Dramatically?
5. Why Do Mortgage Interest Rates Change?