Where Are Mortgage Rates Headed?

As the title implies, mortgage rates are generally either headed in an upwards or and downwards direction. Without turning this article into an economics lesson, let’s briefly look at the reason behind these trends. Firstly, we will deal with mortgage rates (interest rates) going up. You see, interest rates are a pivotal part of the central banks arsenal of tools to deal with a country’s rate of inflation. If inflation gets too high - central banks will raise interest rates, and hence big banks and financial institutions will follow suit - because it’s more expensive for them to borrow money of the central bank.

Alternatively, if inflation pressures are low, this generally points to the need to lower interest rates, and hence the flow on affect of this is the opposite of before. Inflation is not the only reason central banks alter interest rates - other factors could include GDP fluctuation, consumer spending, manufacturing, investment and so on. So - given the current state of the housing market and the economy - where are mortgage rates heading over the next year or so? My prediction would be down. Bank’s need to entice people to take loans which are affordable. Hence - the competition in the industry is sure to drive rates down dramatically.