Average mortgage rates fluctuate from one day to the next. These fluctuations not only affect the cost of a mortgage loan, but they can also affect the housing market itself in some cases.

Understanding Interest Rate Fluctuation

Mortgage rates fluctuate based on changes within the U.S. economy, investor confidence and even global events. The United States Federal Reserve also plays a significant role in the determination of average mortgage rates. In some cases, experts forecast mortgage rate trends accurately. However, there are no guarantees when it comes to future mortgage rates.

Effects on Home Prices

According to the Wall Street Journal, there isn’t a direct relationship between mild mortgage rate fluctuation and home prices. However, some of the factors that cause interest rates to rise or fall may have a mild effect on home prices as well.

Extreme changes to mortgage interest rates, on the other hand, can affect home prices directly. For example, if the average mortgage rate suddenly spikes, buyers may not have the income or resources to accommodate the change, causing them to rethink their purchases. This leads to a decrease in sales volume and drop in the demand for homes. Once homes are not selling as easily, sellers are forced to lower their home prices in order to make mortgages more affordable. Conversely, if mortgage rates drop precipitously, buyers are able to purchase more confidently and at higher prices. This leads to a greater demand for homes, allowing sellers to charge a higher price without losing potential buyers.

Because interest rates and the housing market can change so quickly, Starboard Financial recommends locking in your rate and making an offer on the home of your choice as soon as you are ready to move. Please contact us at Starboard to learn more about applying for a mortgage. As a local lender with a nationwide presence, we can help you to determine how interest rates may affect you and your ability to buy your first–or your next–home.