Mortgage rates, also known as interest rates, are variable and dependent upon several economic factors, both external and personal. Over time, rates will continue to ebb and flow based on a variety of conditions. Though rates have roughly doubled within the past few years, they remain comparable to rates seen in the early 2000s. Keeping an eye on these trends can help you make the best decision when considering a mortgage loan.

External Factors


The rise in the costs of goods and services is known as inflation. Rising prices ultimately leave consumers with less purchasing power, and can affect lenders as well. Mortgage lenders must monitor these trends in relation to their rates to ensure they are not losing money on loans over time. 

Economic Growth

Economic fluctuations are influenced by two major economic growth indicators — gross domestic product (GDP) and the employment rate. A growing economy usually means people are spending more, ultimately leading to an increase in the housing market’s mortgage loan demand. This can lead to increased rates, which effectively allows lenders to manage the capital that’s available to lend. In turn, when rates of growth are low, rates will decrease along with loan demand and spending. 

Global and/or Political Events

War, elections, pandemics, policies, and the Federal Reserve can all influence mortgage rates. Of these, the Federal Reserve is the most controlled, but all should be taken seriously. The Federal Reserve sets its Federal Funds Rate, which serves as a benchmark of sorts for the interest rate that banks should abide by. Other global events are often more abrupt. For example, elections may spur new legislation like tax breaks, causing an increase in mortgage demand. 

Personal Factors

Credit Score

Credit is one of the largest influencers of creditworthiness, and therefore mortgage rate. Having a higher credit score can often reduce mortgage rates due to the lessened risk of defaulting on the loan. People with higher credit scores may have access to a more diverse range of mortgage programs with varying mortgage rate options. 

Closing Costs 

In some cases, people may choose not to pay closing costs upfront. When this happens, that amount is added to mortgage payments each month. Not paying closing costs upfront can increase the risk of the lender and result in the lender charging a higher mortgage rate. 

Buydown Rates

In some cases, borrowers may be able to “buy down” their mortgage rates. In this case, borrowers can pay a set amount upfront in order to decrease their rate. These can be used as a negotiation tactic and are often paid for by a builder or seller. Though resulting in an initially lower payment, buydown rates do not typically last the lifetime of the loan, so a larger mortgage payment should be expected in the future. 

Property Types

The type of property you are looking to purchase can affect the mortgage rate. Properties like condos, multi-family, or manufactured homes can have increased rates compared to single-family homes. Occupancy matters, too! Primary homes usually have lower rates than secondary homes due to the increased risk of a second home mortgage to a lender. 

Get In Touch

To learn more about mortgage loans and mortgage rates, speak with our team of local mortgage lenders at Coastal Custom Mortgage. Our team offers expert advice and competitive rates on a variety of mortgage programs. We’re here to assist you on your mortgage journey and help you achieve your financial goals with customized mortgage loan plans.