Routing # 256078446
MORTGAGE KNOWLEDGE CENTER
PenFed Mortgage with Confidence
MORTGAGE
Economics and Mortgage Rates
What you'll learn: Factors affecting current interest rates and if it's a good time to buy.
EXPECTED READ TIME: 7 MINUTES
November 8, 2023
If you’re interested in buying a home, you may be asking yourself: Is it a good time to buy? When mortgage rates are at historic highs, home prices are on the rise, and inventory is tight, it can feel like it might be time to wait things out.
However, there’s a better question you should be asking yourself — is it a good time in YOUR life to purchase a house? While housing market trends provide important context, your financial situation is unique. Your life goals and readiness to become a homeowner will have an even bigger effect on when it’s the right time to start your homebuying journey.
Even when market conditions are less than ideal, you should never let them get in the way of your personal progress. You might be able to use economic turbulence to your advantage and drive down the asking price. Or, buy now and refinance later at a lower rate. You have options!
Still, it’s always important to know what’s going on in the wider world of home finance before making any decision. So let’s review some important factors affecting mortgage rates, current market trends, and what you need to ask yourself before you put down roots.
How are mortgage interest rates determined?
Mortgage interest rates have a big impact on the total long-term cost of financing a home. While a borrower’s financial health affects the interest rate they’ll be offered on a loan, there are a couple different economic factors, and even government policies, that affect the universal mortgage rates. By understanding these factors, you’ll know why interest rates fluctuate and what could be coming in the future.
Economic factors affecting interest rates:
Inflation
Though inflation reflects the increase of prices in the overall economy, it’s a critical factor for mortgage lenders to consider. Recent stubborn rates are a result of the Federal Reserve’s determination to bring annual inflation back down to 2%. The high interest rates are generally because of a policy response to the rising inflation. Once inflation decreases sufficiently, interest rates can be lowered.
In general, lenders have to maintain their interest rates at a level that’s sufficient enough to overcome the erosion of purchasing power. That way, their interest returns a real net profit.
Interest rates and recessions
For the most part, the economy grows until interest rates are hiked to assist in cooling down price inflation and a skyrocketing cost of living. This results in the onset of a recession, and subsequently, interest rates are lowered to stimulate growth.
Historically, interest rates typically fall during recessions. While there is no way to tell what will happen in the future, if the economy enters a recession in the near future, you can expect interest rates to be reduced and spur a trend of borrowing, spending, and growth.
Individual factors
Though borrowers can’t influence average rates, there are things within your control that could make a big difference in how much you can save when buying a home. Start by shopping for the best deal. Research multiple mortgage lenders before committing. Use this mortgage payment calculator to help crunch the numbers and determine what monthly mortgage payment you can afford.
At the end of the day, despite market trends and temperatures, you have to look at your own life goals, finances, and interests to determine if you’re ready for homeownership. Ask yourself these questions:
- Are you financially prepared?
- How is your job security?
- How long can you see yourself living in one location?
A mortgage is a big commitment, but the more you know, the better prepared you are to dive into the process. By researching the right options and tools, you can turn the dream of homeownership into reality.
SIMILAR ARTICLES
How Long Does It Take to Buy a Home?
Buying a home has several steps, know what they are and how to be prepared. From getting your financing in order to closing and getting your keys.
Beginner’s Checklist for Housing Needs
When you're buying a home for the first time, there are lots of things to consider. This is a comprehensive list of just about everything you need to think about as first-time homebuyers.
Can I Afford to Buy a Home?
Find out if you're financially ready to buy a home. Use our affordability calculator to list your current income and bills and determine how much home you could afford.
Mortgage Calculator - Know Your Options
Use PenFed's free mortgage calculator and determine your monthly payment, including principal and interest. Calculate conventional, VA, and jumbo home loans.
Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.625 discount point, which equals 0.625 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
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