Mortgage Rate Trends and How It Has and Will Impact the Property Market

Various factors affect mortgage rates. A country’s current economic climate has a lot to do with it, but your personal financial circumstances will also affect the rate you get for your loan. For instance, if you have a high credit score, you’ll be able to obtain a mortgage with a lower interest rate. The loan-to-value ratio also contributes to how much you’ll have to pay. Let’s take a closer look at how mortgage rate trends have impacted and will continue to impact the property market.

Handing over house keys

What drives mortgage rates?

There are several factors that have historically driven mortgage rate trends and continue to drive them today. Basically, a country’s central bank sets the interest rate. That rate is based on economic factors like inflation and the level of unemployment. When a central bank sets the rate, each bank uses it to determine the APR range they offer. In turn, that means mortgage lenders can provide different rates to homebuyers, so they can find a lower rate by comparing different lenders on sites like moneywise.com/mortgages/mortgage-rates.

Whenever the central bank sets the interest rates at a high level, the amount of debt rises. And when the debt is high, it discourages people from taking out mortgage loans, therefore slowing consumer demand.

Using a calculator and a laptop

Historically, mortgage rate trends have gone up and down depending on the economic factors outlined above. At present, the global lockdowns that came into place as a response to the coronavirus pandemic have driven mortgage rates low.

Why is it important to stay up-to-date with mortgage rate trends?

By understanding what influences present mortgage rates and future rates for adjustable-rate and fixed-rate mortgages, you’ll be better informed to determine which type of mortgage you should choose and when it’s the best time to purchase a property.

Current and Future Mortgage Rate Trends

Now that we’re in the second quarter of the 2021 housing market, we have a better idea of what trends are emerging and which could be here to stay. Due to the tumultuous marketplace of 2020, low mortgage rates and a limited housing supply are continuing to drive up property prices. More and more buyers are competing for the smaller amount of homes on the market. There are simply not enough homes on the market. In fact, the US housing market is short by about three million properties. It could take years for there to be enough homes on the market to meet demand.

House for sale by the owner

Mortgage rates are slowly rising, but they are still historically low at present. Over the next few months, though, you can expect to see the rates continue upward. But because the rates are still historically low, they will not have a huge impact on mortgage affordability over the next few months.

Another growing trend is less-dense neighbourhoods are becoming more popular. In 2020, moving trends show people were leaving dense metropolitan areas in favour of places that had more space. The lockdowns will have had something to do with that. And now there are so many more remote workers, people are looking for homes with more space because they are spending much more time there. The trend of moving to areas with fewer people and larger homes looks set to continue over the coming months and years, and that trend could impact mortgage rates in ways we aren’t yet aware of.

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