Mortgage rates have been on a roller coaster ride in recent years, with a steady decline in rates throughout the 2010s, followed by an upward trend in 2022.  The current state of mortgage rates can be attributed to a number of factors, including economic conditions and government policies.

The Federal Reserve, which sets interest rates for banks and other financial institutions, has a significant impact on mortgage rates. In response to the COVID-19 pandemic, the Fed has kept interest rates at near-zero levels to encourage borrowing and spending, which in turn has led to low mortgage rates.  However, in 2022 inflation started to pick up pace at a quick rate.

The rapid jump in inflation, caused the Fed to begin to raise short term rates.  The Fed raised the short term rates multiple times in 2022.  This rise in short term rates, and inflation, caused mortgage rates to spike throughout 2022.

Another factor influencing mortgage rates is the economy. When the economy is strong and unemployment is low, mortgage rates tend to rise as lenders can charge more for loans. However, during a recession or economic downturn, rates tend to fall as lenders offer more competitive rates to attract borrowers.

Additionally, the government’s policies play a role in the current state of mortgage rates. The Federal Housing Administration (FHA) and the Veterans Affairs (VA) offer programs that allow borrowers to secure a mortgage with a lower down payment and more favorable terms. These programs, along with the low interest rates, make it easier for many people to buy a home.

It’s worth noting that mortgage rates are not the same for everyone, and the rates can vary depending on a number of factors, such as credit score, down payment, and type of loan. For example, borrowers with a higher credit score may qualify for a lower interest rate than those with a lower credit score. Similarly, borrowers who make a larger down payment may qualify for a lower interest rate than those who make a smaller down payment.

Overall, the current state of mortgage rates is still favorable for potential homebuyers, even though rates are off historic lows. This is a great opportunity for those who are looking to purchase a home, property value increases have begun to reverse and we have moved to more of a  buyers market.  However, it’s important to keep in mind that rates can change quickly, so it’s essential to keep an eye on the market and work with a lender to secure the best rate possible.